Experts: Budget 2012 scores on realism, tanks on reform

Finance Minister Pranab Mukherjee proposed trimming the government's subsidy burden and call for speeding the pace of economic reforms, has been received well by industry experts.

The government has made a clear cut attempt to contain subsidies at 2 percent of GDP. C Rangarahan, chairman of the Prime Minister's Economic Advisory Council said that since subsidies have the impact of increasing the total expenditure beyond the budgetary allocation, Pranab's budget is a define attempt to contain subsidies.

[caption id="attachment_246787" align="alignleft" width="380" caption="Uday Kotak, vice-chairman and managing director, Kotak Mahindra Bank. AFP"][/caption]

Experts, however, felt that even though the budget did not introduce any big-bang reform, it is a realistic budget, aimed at curtailing the fiscal deficit. Moreover, the increase in excise and service taxes were expected and are pragmatic moves.

Uday Kotak, executive vice-chairman and managing director, Kotak Mahindra Bank finds Budget 2012 as a realistic one. However, he feels that fiscal deficit will put pressure on government borrowing program ahead.

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The market too did not expect a hike in oil prices or an FDI nod in aviation or retail. Also investor-friendly proposals like the doubling of tax-free bonds cheered the market, which is up around 90 points post the budget announcement.

Post the budget, bond yields too went up by 8.4 percent. The key, however, going forward will be if the government can actually execute these measures.