The Hindu Business Line : Predictable, but not gutsy

Politically predictable and fiscally prudent, the first budget of the LDF Government in Kerala seemed to sum up the dilemma of how to increase revenues while ensuring that the State's marginalised sections are protected.

Given the fact that it was not quite a brand new effort and given also that such exercises have long ceased to be potent instruments of social change, the first budget of the Left Democratic Front (LDF) Government in Kerala, presented in the State Assembly by the Finance Minister, Dr T.M. Thomas Isaac, on Friday was anything but earthshaking.

Politically predictable and fiscally prudent, it seemed to sum up the dilemma of the LDF - how to increase revenues, boost industrial output and attract upcountry investments, while ensuring that the State's enviable social development standards are maintained and its marginalised sections are protected.

PRO-FARM BIAS

In the event, the budget ended up being strong in its commitment to agriculture and the traditional sectors of the State's economy. Traditional industries such as coir, cashew, handloom and beedi manufacturing receive special attention through allocations substantially higher than in previous budgets.

A separate Agriculture Commission has been proposed to ensure price stability for farm produce and promote investment in the sector. The budget also provides for higher allocations for procurement programmes and productivity improvement programmes. These measures are designed to improve the conditions of traditional workers, fishermen and farmers.

Specifically to help farmers burdened with debts, the budget proposes the setting up of a `Debt Relief Commission' with quasi-judicial powers to arbitrate with private moneylenders on behalf of the farmers who had borrowed money from them at exorbitant interest rates.

This laudable bias apart, it is difficult to agree with Finance Minister's characterisation of the budget as one aimed at solving the financial crisis and correcting the course of development of the State. Only the first part of that claim may prove to be based on solid foundation - witness the increase in tax on certain "luxury" goods such as refrigerators, ovens, floor tiles, health drinks and soft drinks, as well as the proposal to bring some services such as cable television and houseboats into the tax net. Mr Isaac has also not got rid of his pet peeve - gold dealers who, he feels, are a great source of tax evasion.

With these measures, the Finance Minister may well have alienated a large proportion of the middle class who will now have to cut down on their conspicuous consumption, but he doesn't seem to have won many friends in industry either.

Despite sops to tourism and information technology - two sectors of the economy that, incidentally, got along famously without much help from the State Government in the past - the budget offers little that will spur on industry, especially the manufacturing sector.

MIXED REACTION

Some sections of traders in the State have welcomed the budget. The Kerala State Vyapari Vyavasayi Samithi went as far as to declare it as one of the best budgets ever presented by a Kerala Finance Minister since the EMS Government of 1957.

Try selling that praise to the hundreds of small gold merchants in the State who are now faced with additional taxes on jewellery. The Kerala State Small Industries Association has criticised the Budget for neglecting the small-scale sector, even as the tax rates on some commodities have been hiked from 12.5 to 20 per cent.

The Finance Minister managed some flourishes, though. His proposal to introduce `tax lotteries' may lure customers into actually demand bills for their purchases. While the intention - to eliminate tax evasion - is honourable, the principle is ethically moot, given that lotteries have been the bane of the socio-economically backward sections of Kerala's population.

Also, the incentives to the "beautiful game", in keeping with the samba spirit of the World Cup, will perhaps kick off a rekindled passion for sports in general.

But will the measures announced in this budget take Kerala itself into the first division league? The answer to that is another ball game altogether.

The writer can be contacted at kgkumar@gmail.com