The Budget 2010 and Beyond

The Budget 2010-11 was welcomed with mixed reviews, the day after Holi I think people can really sit back and take a reality check rather than swaying with the emotions which arose in the heat of the moment, with the opposition going hay wire about the budget.

To begin with the fuel price hike which already has  created a furor, with the opposition playing the inflation agitation. However it is pertinent to note that no growth can take place without inflation, especially in the current economic situation, this was a wonderful balancing move by the FM. Moreover an inflationary impact of only 0.41 per cent on wholesale price index would be caused which would be absorbed in due course of time. Further the risk of inflationary pressure can be avoided by improving supply. The food inflation is expected to come down as a good rabi crop is expected, further good inputs of sugar and pulses are expected from Brazil and Mynanmar respectively. Further since the RBI had already hiked the Cash Reserve Ratio (CRR), resulting in increase of the interest rates by banks which would further control the excess liquidity in the market keeping a further check on the inflation.

The FM has depicted a great vision by allocating 37% of the total outlay to the social sector. The move to set up a ‘National Social Security Fund’   with an initial allocation of Rs. 1000 crore , with the purpose of supporting schemes for the workers in the unorganized sector, such as rickshaw pullers, weavers, toddy tapers etc. The FM has really kept the spirit of welfare state, truly in the favour of the aam admi as he calls it.

The FM has further given a reason to the salaried middle class to celebrate, by announcing an entirely unexpected windfall of upto Rs. 56000 per annum from the reworked personal income tax slabs and a new tax exemption option.

Keeping their promise the FM provided a 2.5% increase to the flagship rural employment scheme (NREGS) than last year; also the Bharat Nirman got 6% over the budgetary allocation last year. Moreover the benefits of the Rashtriya Swasthya Bima Yojana (RSBY) have now been extended to all Mahatma Gandhi NREGA beneficiaries who have worked for more than 15 days during the preceding financial year. The scheme provides health insurance cover to BPL workers and their families and so far more than one crore smart cards have been issued under this scheme.

The FM  further  considering huge job losses due to economic recession ,enhanced fund allocation for micro, small and medium enterprises (MSME) by over 600crore to 2400 crore for the next fiscal to help the sector beat the impact of global slowdown.

Further important measures have been taken to consolidate regulation in the financial sector. The establishment of the Financial Stability and Development Council will help inter-regulatory co-ordination while the Financial Sector Legislative Reforms Council will provide an outline for the expected reforms in this sector. The provision of additional banking licenses to private sector entities will enable greater competition in banking even as public sector banks are strengthened through re-capitalisation. Further the steps taken to encourage agricultural growth are welcomed. The dual strategy of increasing agricultural productivity on the one hand and initiating reforms in the food supply chain on the other is one that has long been recommended by CII. If implemented well, this can go a long way in overcoming the supply bottlenecks that have been responsible for the current increase in inflation. Incentives provided to the food processing sector will also enable greater investment in this critical area.

The need for greater investment in infrastructure has always been highlighted as it serves as a catalyst for growth. Budget 2010 has provided for significant increases in the Plan outlay for the critical infrastructure sectors such as roads, power, housing and rural infrastructure. The National Clean Energy Fund has also been established with an allocation of Rs 1000 crores to promote research and innovation in clean energy.
Thus the FM has sent out a positive message for reform that will ensure stable macro- economic environment stable for growth. A well rounded effort at economic management, this budget which is centered around the ‘aam admi’ reminds me of what Mahatma Gandhi described , the India of My dreams, “ ….an India in which the poorest shall feel that it is their country in whose making they have an effective voice…”.

Akriti Chaubey

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