Don't Have High Expectations From Budget: Mohandas Pai

Arun Jaitley's maiden budget on July 10 is going to be a closely watched affair. The stock markets have risen 20 per cent year-to-date in a rally spurred by hopes that the election of Narendra Modi as  prime minister would revive economic growth.

However former Infosys CFO Mohandas Pai believes the expectations are "too high".

"I think the expectations are far too high, everybody believes the problems of the last three years will be solved in this budget and it's not going to happen," Mr Pai, who is the chairman of the board of Manipal Global Education Services told NDTV. (Watch)

"First of all we need to understand the economy is not in good shape, the fiscal condition is not in good shape," he added.

The country's economy is grappling with its worst slowdown in 25 years after it grew at sub-5 per cent for the second year in a row last fiscal.

Mr Pai also pointed out that people of the country and industry must not expect any tax relief in this year budget given the fiscal condition.

The Indian economy is exposed to "shocks" on account of high fiscal deficit and the country's credit outlook will depend on government's initiatives in the budget to contain expenditure and reduce exposure to global commodity prices, rating agency Moody's had said last month. The deficit last fiscal was 4.5 per cent.

"People of this country, industry have to be real to say we are in a difficult financial condition as far as the budget is concerned, the economy is not growing, confidence has to be restored. So confidence can be restored more by policy action, by clearing up the logjam in applications and approvals and not by the budget," Mr Pai said.

He also stressed on the need to have realistic tax collection targets in the budget unlike previous budgets, where high tax targets according to Mr Pai, led to tax "extortion" and "terrorism" where retrospective tax notices were slapped on multi-national giants like Vodafone, Shell, Nokia and others.

"85 per cent of them (tax cases) are being set aside in appeals and this is creating a furore in the industry and people are very disgusted and people are losing faith in the entire system because tax collection seems to be degenerating into tax extortion, primarily because of very high targets put into the budget," Mr Pai said.