Economists will have their eye on the fiscal deficit the finance minister will project for FY14 on Thursday, and fiscal purists will examine whether the numbers make any sense at all—Citi economists, for instance, reckon a R70,000 crore deferral of subsidy payments is on the cards for achieving the 5.3% fiscal deficit target for FY13 itself. Practical businessmen, on the other hand, will be looking for signs of stability in taxation practices—will the FM roll back the retrospective taxation, or Vodafone amendment, brought in by his predecessor and will he make any announcement on going slow on the rash of transfer pricing cases made out by the taxman in companies as diverse as Shell and Nokia? A panel discussion on the occasion of the FE Best Banks Award last week had some interesting points in terms of what businessmen were looking for as well as some replies from representatives of the political class.
While much of the finance ministry-RBI discourse over the past year has centred around the critical role of interest rates, HDFC Bank managing director Aditya Puri was unequivocal in saying interest rates were not holding back investments, it was the shortage of coal and the lack of environment clearances that needed to be tackled—indeed, Puri’s view was that, were this to be tackled, many restructured loans could once again move back to the standard loan bucket. US private equity firm Blackstone’s India chairman Akhil Gupta was more forthright while talking of the damage inflicted by political actions. He had got a $250 mn investment lined up, he said, when the budget announced the retrospective tax change, as a result of which the investors simply disappeared, and they still haven’t returned. The question as to what it would take to get investments back on track—from 38.1% of GDP, investment rates are down to around 35% inFY12—got even more interesting answers. While HDFC Bank executive director Paresh Sukthankar felt investors would look to complete stalled projects before making any new commitments and L&T CFO R Shankar Raman felt it was unreasonable to expect new commitments before the next elections, Gupta said that investors were no longer prepared to back projects in good faith—we will no longer invest in a project which doesn’t have a coal linkage, he said, since we’ve burnt our fingers doing this in the past thinking the linkage would happen soon. Vodafone India’s managing director Marten Pieters spoke of the waste of capital due to government policy that ensured there were 8-10 players in the market and didn’t allow consolidation and of how the policy on re-farming spectrum was once again adding dramatically to costs. While the direction of government policy will be clearer on Thursday, serious investors will be looking for a lot more.