Desperate times call for desperate measures. As the world is grappled by a slowdown, there is not a single economy which has escaped. India is no exception to this. The announcement of the interim budget was preceded by a huge pile of expectations and the onus of pumping some life into our economy which has been affected by the slowdown. Expectations were bound to rise for the industry which has not yet been soothed by the bailouts. Daily business has also become a struggle. It was expected that the budget would hint at undertaking steps to boost the sagging real estate, automobile and export sectors. But the interim budget turned out to be nothing more than a damp squib.
Firstly, the budget was merely a reiteration of the achievements of the UPA government’s tenure over the past 4 years. It could be seen that the finance minister, Pranab Mukherjee chose to highlight the growth achieved till 2007- 08. The following years when the actual crisis shook the world, and a period when our economy had to bear the brunt of that were conveniently dismissed off as something inevitable. One should bear in mind that the UPA government’s tenure included 4 years of an unmatched boom before the economy began to slow down last year. This boom was primarily responsible in huge tax collections which helped the government to spend more without having to worry about a fiscal risk.
The most daunting task for the next government will be the fiscal stress indicated by the fiscal deficit. The fiscal deficit increased from 2.5% of the gross domestic product to 6% and this will remain a cause of concern for everyone who believes that India has the potential to resurrect itself despite the slowdown. The interim budget had absolutely no mention of how the government was going to tackle this shortfall.
One striking aspect of the budget was a whopping Rs. 141703 crore allocation to Defence, an astounding 34% increase from the previous year’s budget. In the wake of the Mumbai terror attacks and the fact that India must be ready to counter terrorism in all forms at any time, this allocation is still questionable because there remains little transparency in the expenditures related to defence.
It could be seen that the focus was primarily on social security schemes for the poor. Rs. 131317 crore were set aside for social sector schemes which means that the UPA government’s flagship programmes that directly impacted the common man have been satisfactorily funded. But for a large chunk of the economy, the urban population with the white-collared jobs who have been struggling on a daily basis to hold on to their jobs, in a situation where anyone could be shown the pink slip on any given day, the budget has shown no relief. The recession has been responsible for businesses and firms adopting an apprehensive approach when it comes to employing more people. The issue of urban unemployment remained untouched. This remains a major flaw and a point of criticism for the budget.
Exporters have also been left asking for more. Many countries have offered stimulus to increase exports because of the slowdown. Exporters were expecting deductions in service tax, re-introduction of income tax exemption on exports, increase in investment allowance and higher allocation for marketing development schemes. However, only the interest subvention schemes have been extended for a limited period of 6 months. The budget provided no relief to the backbone of the Indian economy- Agriculture. Agriculture spending has been hit by the recession which has resulted in a dip in farm incomes.
The budget has no mention about offering stimulus to the technological advancements in the country. It is a pock mark on the face of one of the brightest and most steadily developing countries in the world.
The announcement of the budget was followed by the Sensex (often considered as the barometer of the country’s progress) nose-diving by 331 points. This clearly indicated that the market was unhappy about the lack of major measures to help the industry in the vote of account.
The interim budget faced severe criticism from the opposition which says that in the present scenario, the rudimentary duty of the government was to take effective measures to spur the economy and provide employment.
All in all, it was a highly disappointing budget, although some say that nothing much should have been expected out of it for the sole reason that it was an interim budget. The budget which would be out by July should be the one to look out for. The interim budget has been ridiculed by many as being nothing more than an election manifesto. The debate can be endless. However what the aam aadmi can expect is for the budget to provide hope that we can chose to be proactive in such difficult times. Hope can move mountains after all.