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A Marketable Budget!

2^nd March 2010- The Kolkata wing of ‘Cash-O-Nova’, the Finance club at IIFT, organized a panel discussion on Union Budget 2010-11. The distinguished panel comprised of Dr. Ajitava RayChaudhari, former Head of Economics Department at Jadhavpur University, Mr. Gopal Aggarwal, Indirect Tax Consultant, PricewaterhouseCoopers and Mr. Chetan Panchamia, Head, Equity Research Division, Eastern Financial Ltd. The discussion was moderated by Dr. Ranajay Bhattacharya, an Economics graduate and Fulbright scholar and also a popular professor at IIFT.

Dr. Bhattacharya stated that like every year the current budget too reflected the tussle between economics and politics. He set the tone by stating that this budget was “less popular” than the previous one. However this view was opposed by Dr. RayChaudhary who stated the dual problem of growth and inflation that India faces and said that only innovative budgets would be the way out. He explained how strong social programmes and the rise of the Indian middle class had helped fuel demand but due to poor monsoons we had short supply. This was causing the inflation and he thought only long term measure such as projects under Bharat Nirman like building roads and in general agriculture infrastructure would be the way out. He stressed that budget being basically a one year plan could not cure the problem of inflation; rather what it could do is set the road map for the future. He also emphasized the need to remove the subsidies unless it was absolutely ensured that it benefitted the intended persons. He welcomed the idea of Unique Identification number (UID) programme as a solution to this problem. He did criticize the hike in indirect taxes as this would hit the poorer people more than the middle class and rich.

Mr. Aggarwal voiced a similar opinion on the increase in indirect tax. He reiterated that while the change in slabs made the budget a good one for the middle and high income families, the poor were not incentivized enough. However, he lauded the fact that the honourable finance minister had set a specific date (April 2011) for the Goods and Services Tax (GST). He saw this as a step which will remove the cascading effect of the various excise tax, customs tax etc. He also spotted a trend of a fall in the excise tax and increase in service tax. He said that this was an indicator that India was slowly but steadily moving towards service taxes. He rated the budget a modest 7 on a scale of 10.

Stock market’s reaction is an important indicator of the marketability of a budget and according to Mr. Panchamia the budget was a very marketable one. It not only addressed the question of fiscal consolidation but also stated that the aim was to get the fiscal deficit down to 5.5% of GDP. This was in fact what the market was looking forward to hear as this would mean a better rating from credit agencies, thereby ensuring more inflow of FII. However he did mention that the oil subsidy had caused the debt market to give thumbs down to the budget. He was of the view that markets would be bullish as long as we avoided global pitfalls.

We also witnessed a very good discussion at the end of the session with the floor been thrown open to the students. Prof. RayChaudhari pacified the concerns raised by the students regarding overheating of economy by emphasizing on the importance of technological development. He favoured more focus on developing infrastructure over doling out subsidies. Mr. Chetan was optimistic regarding the disinvestment of the PSUs and Mr. Aggarwal felt that there was a high probability of IT tax cuts being extended by the turn of the year. The session was closed on a positive note with the speakers reasserting that there were definite benefits from this budget such as the bringing of the GST. The final assessment termed it a budget on expected lines and definitely not a path breaking one.

By: Sayani Ghosh

MBA(IB)

2009-11, IIFT

RBI Ex-General Manager Delivers a Talk on Workings of the Central Bank

19^th February 2010, Kolkata : Cashonova the Finance Club of Indian Institute of Foreign Trade, Kolkata organized a lecture by Samirananda Roy, retired General Manager, Reserve Bank of India. Mr. Roy has also served the government of India in various other capacities. Presently he is working with Disha Consultancy, a trust set up under the aegis of ICICI Bank and engaged in imparting financial education among poor people.

The lecture took us on a historical tour of the country’s central bank. Mr. Roy having served the organization for quite a long period of time presented an insider’s view of the organization. Beginning with the evolution under the colonial masters, the talk encompassed the post reform era of the Indian economy as well. The brief history of the organization was peppered with several anecdotes involving Mr. Roy and his seniors which added a personal touch to the discussion.

The lecture gave the students an insight into the various roles and responsibilities of India’s central bank. He reiterated the role of the central bank in the socio-economic affairs of the country. The students were made aware of the numerous obligations of the central bank and the importance of an overarching mandate being handed over to it. The role of RBI during different period of times and the implication of the policies as enunciated by it was made amply clear. “If the central bank of the country earns profit then country’s health is not good.” Such profound observations clearly led the students in appreciating the larger picture and interrelationship between business of the central bank and its impact on economy.

The lecture was interspersed with thought provoking questions by the students continuously thus making it seem more like a dialogue. The talk was drawn to a close with a vote of thanks and the presentation of a token of appreciation by the club coordinators.

By: Mritunjay Kumar

IIFT, Kolkata MBA(IB) 2009-11

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