Given the recent Global Financial Meltdown and its impact on the Indian economy, a great deal was expected from the budget 2009-2010. However, as Pranab Mukherjee presented the interim budget on the morning of February 16, 2009, many were less than satisfied. His speech was clearly a part of pre-election propaganda, focusing on the laurels achieved by the United Progressive Alliance (UPA) and what a brilliant job they’ve done for the economy. In a not so subtle reference to the election symbol of the Congress, Mr. Mukherjee said, “I have no doubt that when the time comes, our people will recognise the hand that made it all possible. The hand that alone can help our nation on the road to peace and prosperity.”
The speech was clearly aimed to juxtapose the current government with the previous one, as figures were constantly compared to those of 2004-05. It tactfully harped on the India’s growth rate in the recent years. It was mentioned that the UPA inherited the economy with a growth rate of 6.6% and at the end of its tenure we find ourselves with 7.1% growth. The basic intention being to prove that in spite of a fall in growth rate from the last years (with a sustained growth of 9.9%), the current government has still managed to sustain an overall increase, making India just second to the fastest growing economy in the world.
The interim budget did have some good measures. Owing to the disastrous attacks of 26/11, the defence allocation has been upped by a thundering 34%. Then again, this may have just been an attempt by the government to redeem themselves in the aftermath of the criticism they faced for the attack.
The spotlight, however, was on the rural sector. New schemes for debt relief and debt waiver have been proposed. This was accompanied by a complete waiver of loans for small and marginal farmers owning up to 2 hectares of land. The growth of 2.4% in agriculture was heavily stressed. This was perhaps to prove to the rural masses the benefits conferred on them during the UPA’s tenure.
This focus on the aam aadmi left some gaping holes in this year’s budget. For one, it let down many expectations of the jobless, tax-paying citizens. With no tax reductions or lowered interest rates, those hit hard by the recession have no relief. The buying power of the consumer will continue to remain low. The budget failed miserably in cushioning the effect of the meltdown in these times of joblessness and despair.
India’s corporate sector clearly did not take the news well, indicated by the 3% drop in the Sensex along with the downward dip of the Nifty. While Mr. Mukherjee was still delivering his speech, investors realised there were going to be no new announcements for relief and rushed to sell their stock.
The second area of concern is the staggering fiscal deficit of 6% (as opposed to the earlier 2.3%), which was blamed on the global slowdown. It is, however, a clear indicator that the government has been spending way beyond its means. Even more disappointing was the projected fiscal deficit of 5.5% for 2009-2010.
Pranab Mukherjee claims to have chosen propriety over popularity. It is amusing though how politicians and ministers chose propriety at the most opportunistic moments such as this one. Even though an interim budget is meant only to tide the economy over till the next government takes over, there is nothing in the Constitution which bars the current government from introducing tax benefits and other such measures.
The interim budget of 2009 truly seems to have lacked lustre. It appears to have almost ignored the near-recession faced by the country. With no measures to bring us out of the doldrums and its stand that India has not been hit by the global meltdown, the UPA seems to have left us on a dry note. What political agenda is behind this move, one cannot know. But the opposition seems to have jumped at the opportunity to label the budget full of ‘misleading claims’ with regards to its performance over the last five years. All we can do for now is wait and hope for the final budget to do more justice to the economy with lesser political undercurrents.