After much speculation, the interim budget was released on the February 16, 2009, and did lead to a lot of hue and cry. We have read about it all over the papers and it has been quoted by the experts as a lost opportunity to alleviate the current economic slowdown. Suresh Tendulkar, Chairman of the economic Council to the Advisory Council to the Prime Minister thinks the budget has been presented in a responsible manner.
Keeping the expert theories aside, I feel that this is not really a budget, but a vote on account in guise. With the general elections in April-May, over Rs. 850 crore have been set aside for poll expenses. Touted as an attempt by the UPA government to fool the “aam aadmi”, people chose to believe that the budget is a useless proposition advocated by the government. Nevertheless, the UPA Government was able to pull of an unprecedented GDP growth during its tenure. During the last four years the Indian Economy had been managed reasonably well. India grew at a rate of 9% registering the highest growth in the stock market index while EU and US are growing at negative rates. After seeing the effects of the global meltdown in Dubai and the badly affected China, the Indian Economy at 7 % can be considered miraculous.
The budget has provided growth avenues for sectors like Defence–grossing the highest stake, textiles, gems and infrastructure.
While the Mumbai attacks are still raging in everyone’s minds, Mukherjee has assured that the Defence sector is given its due by unsurprisingly hiking the expenditure on defence by 24 per cent to Rs 1,41,703 crore, to meet the security requirements of a troubled nation prone to large scale terror attacks. The sector accounts for almost 14.86% of the total expenditure for the next fiscal. It is now imperative for the next government to ensure that the allotted funds also ensure public security.
The budget was released by the Finance Minister sticking to the conventions. Hence, it does not announce any policies which can trigger economical boost in the current slowdown. The Interim Budget did not have any proposal, direct or indirect, for revision in tax rates.
In the infrastructure sector, the government has taken steps to encourage the private investments by approving 37 infra projects worth Rs 70,000 crore between August 08 & January 09. It has also allocated Rs 40900 crore for Bharat Nirman Scheme. This will result in a positive impact on stocks of Hindustan Construction Company, IVRCL Infrastructure. Hence, these sectors can be suitable for investors during this period of slowdown.
The railway budget has ensured a reduction in fares by 2% for virtually all classes. This has very much affected the monthly expenses of an average middle class family in a positive manner. The Railways have proposed studies to start “bullet trains” in India and to set up call centres. This will make the regular commuting look better and stylish! Call-Centres will create employment avenues and result in better consumer interaction.
A major highlight of the budget includes announcement of over 12,000 tenements in the island city, to be completed by March, 2010. The flats under this scheme will be made available to the mill workers and about 2000 of the tenements will serve as transit camps.
Investment in the current times is largely defined by the risk-appetite of a person. Even though the stock market index looks shaky, a small part of the investment should always enter the equity. The rest should go in fixed deposits, about 20% in gold and in short tem mutual funds.
In India, the demand of fresh gold is low. Gold is seen as a safe haven. Due to a lot of risk aversion globally, there is what can be termed as a “gold rush”. It is believed that the gold prices can reach around Rs. 17,500 per 10 gm during the next two months and may sustain there for a year if the US ends up printing dollars to fund the borrowing planned this year. The US economy is facing huge cash crunch and major portion of the government funds are exhausted in bailing out colossal financial institutions like the Citigroup and Lehmann Brothers & Co. This spurt in gold prices has prompted many housewives to sell their jewellery at a higher value and build up on a financial corpus.
As a lay man, I feel that the budget could have elaborated on novel initiatives like low-cost housing, providing security of workers in terms of life insurance, setting up of schools and empowering women by making provision for government funded small-scale industries. This will help the rural women to be financially independent. Health-Care, Sanitation and drinking water facility is another area which beckons the moral aspect of the ruling government. The aforesaid projects can be undertaken in a rural development scheme. It remains the responsibility of the future government to make sure that these areas are well looked after, so that their people feel involved in the state of affairs deciding the finance of the nation.
The final budget which will be released soon should concentrate on subsidizing products of large consumer requirement like eggs, milk, onions and potatoes. The nutrition value of these eatables is very high and should be affordable to one and all. As the barrel rates of petrol have gone down, a further drop in oil and petrol price can be a breather to the commuters.
The budget has also not made any additional announcements addressing the concerns on job losses. While Pranab Mukherjee has asked the industries to reduce the pay and not cut down on jobs, it remains an option to the employer whether or not to go by this verdict. Though the job market is not directly under the budgetary impact, businesses “are” slowing down and are apprehensive while adding new heads to their organization. This can be slated as a response to the ongoing recession. The budget also has not allotted additional funds for technological advancement or made provisions for research. This is one aspect which seems to be ignored by the ministry. The budget needs to improve on accounting for the welfare of the people and the growth of the economy.
So, the question as to whether the budget is sustainable can be answered only when many other factors are analyzed and considered. It can be improvised in many areas to address the multitude of issues faced by the Indian Economy.
Priya Ganesh Amrute