We know FM is fond of quotes from Thiruvalluvar and in the interim budget speech, he has given us, “Not the spear but scepter swayed with equity, alone gives the ruler victory.” The translation I have read states, “‘Tis not the spear that to the king gives victory; but ’tis his royal scepter, if that ne’er crooked be.”

If my translation is correct, FM has suppressed the crookedness nuance. The crookedness of the scepter has a parallel in the deficit specter. There never was much doubt about red line adherence to a fiscal deficit/GDP ratio of 4.8% (actually 4.6%) or a current account deficit of $45 billion. No analyst expected either red line to be missed in RE. But every analyst had concerns about the way these would be achieved.

FM acknowledges artificial import compression is neither desirable, nor sustainable. A CAD is expected, the key is financing it through capital inflows. The point isn’t deficit cut but how this has been brought about. Slashing capital/Plan expenditure, carrying forward expenditure to 2014-15 (after us, the deluge) aren’t really the answer. Take FM’s proposition on growth. The more pertinent question is growth deceleration under UPA-II. This is the FM spiel. Q1 of 2013-14 had 4.4%. Q2 had 4.8%.

Voila, growth has recovered in Q2. Unless you truly believe something spectacular is going to happen in Q3/Q4, the full year will probably have around 4.7%, not 4.9%. Here is what FM has told us.

The investment rate was around 35% in 2012-13. There was no sharp fall in investments, “except in mining and manufacturing”. Excluding these is itself odd. But that apart, if only incremental capital/output ratio (ICOR) had “remained more or less the same”, we would have had growth higher than 4.5% and FM’s 6.7% target for 2013-14 wouldn’t have gone wrong. FM hasn’t told us how much ICOR is. It used to be 4 and with 4, we should have had a 8.75% growth rate.

We have been told Cabinet Committee on Investment and Project Monitoring Group are doing wonderful things now. 296 projects have been cleared. Why wasn’t efficiency of capital usage an issue until dying months of UPA-II? FM did say there is no policy paralysis. But this does sound like cerebral palsy. If one adheres to budgeted allocations for Plan/capital expenditure in 2013-14, one gets a fiscal deficit/GDP ratio of 5.4%, not 4.6%. And the revenue deficit/GDP ratio is probably more like 4%.

Therefore, targets of 4.1% for fiscal deficit/GDP and 3% for revenue deficit/GDP in 2014-15 are by no means credible. But those promises are for the incoming government not to keep. Stated simply, without dramaticprivatization (whether asset sales should fund revenue expenditure is a separate debate) and even more dramatic removal of tax exemptions, fiscal consolidation is impossible.

This is an interim budget. Understandably, there are no direct tax changes. On the indirect front, why should one do special things for capital goods, consumer durables, automobiles, mobiles, soap etc? Cleaning up and belief in GST should mean all rates should be standardised at 12%. It’s a bit late in the day to try and stimulate consumption expenditure through these means. Nor is pandering to urban middle-class for electoral reasons a plausible argument, though it is possible. Typically, such changes are more because of lobbying.