At the Feet of Rating Agencies

P Chidambaram’s Union Budget for 2013-14 has been criticised for being “dull” and “prosaic”. Budget 2013 became a victim of both wild expectations from the market and the usual media marketing frenzy centred around this annual ritual. It is just as well that Budget 2013 ended up being dull by the standards of the capital market rather than outlandish, like the so-called “dream budget” of 1997-98 which the union finance minister presented in his earlier avatar as a member of the short-lived United Front government and whose consequences we are still paying for. The framing of Budget 2013 may have been constrained by the approaching elections to the Lok Sabha but the finance minister has on paper achieved what he wanted to do: maintain the fiscal deficit at a level that would please foreign investors and international credit rating agencies. By the end of budget day, two rating agencies had given their stamp of approval. But are the budgeted numbers for real? And, what of growth, employment and incomes?

In the weeks and months in the run-up to Budget 2013 it was clear that the United Progressive Alliance government was desperate to signal to the international capital market that it would do what was needed to maintain a large inflow of foreign capital that would cover a burgeoning current account deficit and boost domestic investment. Hence the moves to dilute the General Anti-Avoidance Rules, the road shows of the finance minister to the global capitals of finance and the repeated statements of action about the fiscal deficit. Budget 2013 shows how far the finance minister was willing to go in this regard.