The Union Budget, presented by the Union Finance Minister in the Lok Sabha today is a document without a vision. There is no big idea, which has guided and motivated the Budget presentation exercise. It is an unimaginative budget, which has little nexus to the issues confronting the Indian economy. The Finance Minister has merely utilized the expanding base of the Indian economy to marginally increase the allocations for different departments/schemes. On the taxation front, he has presented a near revenue neutral budget by reducing direct taxes marginally and increasing the indirect taxes.
Inflation is one of the most serious issues confronting the Indian economy. Food price inflation has adversely affected the common man. Except for a routine monetary exercise of increasing the interest rates and curbing the money supply, the government has no idea as to how to deal with the issues. Both in terms of agriculture and manufacturing, expanding productivity does not appear to be an imperative. Increased interest rates in the long run will only make the Indian economy non-competitive in the global context. It will also hamper the manufacturer sector, which is extremely important for creating new avenues of employment, particularly in view of the under-employment in the agriculture sector. The government’s figures of reducing fiscal deficit, last year from 5.1 percent to 4.6 percent was based entirely on the amounts realized from 3G spectrum auction. If the Prime Minister’s theory of spectrum not being a revenue raising exercise but merely a tele-density exercise for the 2G spectrum had been accepted in the 3G spectrum, even this would not have happened. In the absence of such a facility available next year, reduction of the fiscal deficit appears to be more challenging.
The casualty in this year’s Budget is infrastructure creation. Roads, highways, ports, power sector has suffered immensely during the present regime. One expected bigger ideas from this government to incentivize the public private partnership to give impetus in these areas. Regrettably, nothing has been done. This renders the present budget essentially as a packaging exercise, where the expenditure entries could be made by the expenditure secretary and the revenue collection figures could be dictated by the revenue secretary. The political leadership, which was required to give a vision to this budget appeared to be lacking.
This budget gives no impetus to job creation. In the absence of expansion of the manufacturing sector, high employment opportunities are not likely to generate. The 8.6 percent GDP growth rate is essentially on account of 9.6 percent growth in service sector, in which the government has minimal role. The manufacturing growth is declining. It is a cause for concern. The 5.4 percent growth in agriculture is an optical illusion since the 2009-10 agriculture growth was lower on account of uneven rainfall. Thus, in a normal agriculture productivity year following a low productivity year the percentage increase contributes to the larger GDP growth without it having an impact on the economy.
It is a heartless Budget in as much as it increases healthcare cost in India. Public health care is overcrowded and inadequate. It is essentially meant for those who are unable to afford private healthcare. To make private healthcare costlier by inclusion in the service tax is a cause for serious objection. Tourism is huge employer of manpower across the world. India has yet to realize even a fraction of its tourism potential. The rich pay for Tourism and others get employment. The Indian tourism industry, compared with its global counterpart, is already costly. This Budget will make it increasingly non-competitive.
To the middle classes, salaried employees and others this Budget offers no cheers. The nominal increase of the tax exemption from Rs. 1,60,000 to Rs. 1,80,000, at best, brings Rs. 2,000 per year tax rebate to this category. This is more than offset by the inflation, rise in food prices, and various other increases influenced by the proposals contained in this budget.
The global oil prices are rising. The increase in oil price is creating a dual burden on the consumers. He has to pay for the cost of crude oil. Additionally, he has to pay for the ad valorem duty. There is a strong case for replacing ad valorem duties with specified duties so that every time the crude price rises the consumer does not have to pay higher taxes for the increase. We did not expect the government to profiteer out of oil price increase. We will continue to press for rationalization of duties in relation to petroleum products.
The Economic Survey and the Budget amply clarifies that the food grain stock of 46 million tonnes, which is twice the storage capacity. The government is accountable for the fact when the food prices were rising, why was this stock not offloaded and allowed to rot.
This Budget was expected to address the evil of Black money, which has corrupted even India’s polity. Unfortunately, nothing has been done in that direction. Sucking black money out of the system would also reduce the additional liquidity for this colour of money from the market. Sectors, which are responsible for generating excessive black money had to be looked into and remedial measures found. The finance minister has ignored the extent of the problem that is eating into the very vitals of the Indian economy.