On the 29th of February, as the nation looked forward for the government’s yearly public expenditure agenda, the finance minister, Mr. Chidambaram, presented an all-please budget. He was only the second finance minister to have the honour of presenting five successive budgets on behalf of the UPA government.
The minister began on an optimistic note by assuring that the budget is aimed at maintaining, if not exceeding, the average 8.8% growth rate of GDP. The budget promises on making growth inclusive and on increasing aggregate consumption.
Mr. Chidambram silenced all his critics by announcing a Rs. 60,000 crore debt relief for farmers, proposing to revise personal income tax slabs that cut income tax liability from Rs.4000- Rs.5000 depending on where citizens earn and invest. The move to increase the earnings of salaried employees and the prospect of the sixth pay commission has given many a reason to celebrate. The assurance that cars, two wheelers, air conditioners and medicines will cost less, has proved the political importance of the strong middle class. The allocation for health and education has increased depicting the government’s objective of enhancing human capabilities. Skill development and human capital have emerged as thrust areas.
The corporate sector, however, does not seem to be too happy. Though the CENVAT rate has decreased, there has been no change in the corporate tax rates and the short term capital gain tax has been increased. New taxes will be imposed on transactions over commodity exchanges. Depicting the sentiments, the sensex has been bearish since then.
The budget seems to be gender sensitive, as women will not require to pay taxes upto income of Rs. 1.8 lakhs and a generous allocation has been made towards women special schemes. For the first time, there is a separate budgetary allocation for children.
However, there is a flipside. To insulate the economy from a possible recession in the US, the government should have focused on reducing fiscal deficits and thus have a tight fiscal policy as this would lead to a decline in the pressure of excess demand by inflow of foreign funds and finally a decrease in interest rates and a reduction of the gap with global interest rates.
The loan waiver will help only those who have borrowed from the government banks or cooperative societies. However, nearly half the distressed farmers have borrowed from moneylenders and can expect no relief. Moreover, the budget does not discuss issues regarding controlling inflation.
At the end of the day, it is a populist budget. We must hope that it is implemented efficiently and effectively although this may be wishful thinking. Here’s wishing luck to the government. May the budget come in handy for the general elections.