Budget 2008-09: An Amateur’s Overview

I hope you haven’t already started yawning on seeing the title of the article. I admit, the budget does not inspire much excitement among the youth mostly because of the complicated jargon used in it. But the Budget 2008-09 has got the whole nation debating about it.

The main cause for this excitement is the fact that it could be the last Budget presented by the present coalition Government which will be contesting the Lok Sabha elections later this year. The United Progressive Alliance (UPA) has had to face the wrath of its key allies (the Left) over the US nuclear deal. This makes it all the more important for P. Chidambaram not to deliver a Budget that might work against the interest of the UPA. Experts believe that the Finance minister will have to play it safe and not introduce any radical changes in the Budget. The UPA will be looking at appeasing the key sections of the voting community, therefore, one can expect vote-bank politics to greatly influence the annual budget this year.

By focusing on 3 macro objectives of inflation control, infrastructure and social development the Budget 2008-09 promises to sustain the GDP growth rate and make it inclusive for the middle and poor strata of the society. This is one of the rare occasions where the Finance Minister has the luxury of formulating welfare centered schemes against the backdrop of an economy with a growth rate of 9% ! The Budget is expected to give a thrust to education, health and water.

The past few days has generated a heated debate with the inflation rate growing steadily at 4.4%. But the FM says that all is well as the rate is well below the 5% level. The Petroleum industry wants the tax component on oil to be lowered from the existing 57% to a more reasonable level. If that can be achieved it will reduce the oil prices and thereby ease the pressure on inflation.

The Indian economy is mostly ridiculed for having infrastructure that does not meet World Standards. Addressing this problem Chidambaram has set aside US$500 billion for the development of infrastructure in the 11th Five Year plan (2007-12).

The “aam janta” and the corporates can heave a sigh of relief as Chidambaram has indicated at a significant change in the taxation system too. The Direct taxes could be reduced from the existing 33.6% inclusive of surcharge to about 25%-30%. It is believed that lowering of tax rates would induce people and organizations to be more open about their actual incomes. This in turn would improve the tax collections of the Government. There is also the whole debate about the effect of US recession on the Indian economy and how the Finance Minister would deal with it. The US recession has meant that the Indian rupee has greatly appreciated and the exporters are facing the brunt of it. In order to reduce the load off the exporters the RBI is expected to address this issue through its Monetary Policy.

The debate on the Budget can continue much beyond this article. But the basic purpose here was to inspire interest about the Budget among the youth. One thing to be kept in mind is that the Budget controls everything: be it the turnover of an MNC or the fate of a Government!

Anam Mittra