According to Wikipedia, the purpose of budgeting is to, firstly provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out and secondly enable the actual financial operation of the business to be measured against the forecast.
However, that’s not what is actually been done in the present time. Interim budget of 2009-2010 is a tool used by the ruling party to strengthen its base and attract more and more votes. This is what could be seen on February 16, 2009, in the financial budget by standing Finance Minister, Pranab Mukherjee, who talked more about the achievements by UPA in the last five years rather than pointing out new policies for the following year.
I am no expert on budget, but I just hope that this budget is pro- ‘aam admi’ and not ‘pro-rich’. Since the ongoing meltdown has taken its toll on everyone, particularly the poor and the farmers, so the policies should be such which can alleviate the abject poverty which is very much prevalent in today’s society.
In Budget 2008-2009, the government had announced a huge fiscal stimulus accounting to Rs 1,93,000 crore which has helped keeping India chugging at along at 6-7% growth rate, even as most of the developed world has gone into deep recession. This fiscal stimulus combined with many monetary stimulus measures have also helped to arrest the free fall of stock market and the depreciation of rupee.
So even in the Budget 2009, it is important that a large part of the deficit which has doubled be monetised i.e. financed by government borrowing from RBI. Aggressive monetary policy is necessary.
The main driver of growth should be lower interest rates and increased credit flows to consumers and companies. With energy and commodity prices crashing in the past few months, cost pressures have disappeared and the demand pressures too have been neutralized with this sluggish growth.
The real estate developers are having a hard time. So public spending on infrastructure will be the most significant contributor and falling prices and interest rates can help the real estate developers from losses. Growth in infrastructure will not only alleviate the supply side constraints in industrial production, but also stimulate additional domestic demand required for industrial growth.
With the ongoing food crisis, the acceleration of the growth of the agriculture sector is a must, which will help pushing the overall GDP upwards and would also make growth more inclusive. There may be also a better targeting of food and fertilizer subsidies to optimize resource allocation and improving the productivity of crops. Ashtray Kristi Vices Yoga should also be initiated. Exemption of capital gains tax on lands owned by government can also help improve the farmers’ condition.
There is an imperative need to facilitate the growth of labour intensive industries especially by reviewing labour laws and labour market regulations. This is particularly important in reversing the currents not so encouraging manufacturing employment trends.
Identifying the poor and targeting subsidies, tax credits to low middle class people, investment in rural and farm structure, reforming the land markets credit, input subsidies, investment in infrastructure, health and education, ensuring capital expenditure , channelising savings into better domestic markets, making long term capital available for infrastructure projects, announcing phased reduction in SLR and defence and social sector reforms should thus be the main objectives of the BUDGET 2009.
Let’s hope that the government squarely addresses every sector with foresight, sensitivity, fairness and transparency for us and takes out a budget that helps us survive this global meltdown.