The Hindu Business Line : Budget with debit side bias

Rarely has the economy run so well for a Finance Minister presenting the Budget for the new fiscal: a blistering pace of growth of over 9 per cent in the past two years, and an average of 8.6 per cent for three years of the UPA Government. The nation has been spellbound by the numbers that wove a magical story. Manufacturing has grown at 11 per cent this fiscal, up from 8.7 per cent and 9.1 per cent in the last two years respectively; an increase in the per capita income by 7.4 per cent in 2005-06; the spurt in savings and investment at 32.4 per cent and 33.8 per cent respectively; the robust revenues for the government for the third year running; and a fiscal deficit reduction never achieved before. There was so much to build on; yet Mr Chidambaram may have just passed up the opportunity.

The Budget does not contain much evidence of delivering on the Government's commitment to economic reform, casting an eye instead over the other side of the report card: Sluggish agriculture, lack of irrigation and infrastructure, low social sector indices, shortage of basic and technical education, in a word, the underbelly of the economy. Casting an eye on the debit side of the report card is not a new exercise for Budget-makers and Mr Chidambaram has followed that tradition. The swelling national kitty allowed him the luxury of spending more on welfare programmes without hiking taxes. But it does seem strange that he should have increased the dividend distribution tax to 15 per cent in the name of "vertical equity". A scaling up of this tax is unwarranted: it may not gather anything significant and yet will hurt the sentiment of growth that has added so much to the Government's own image and coffers. The allocations for the neglected sectors are impressive: 34.2 per cent increase for education, in general, with a 35 per cent jump for school education, 21.9 per cent for health, 31.6 per cent for all Bharat Nirman schemes and a near doubling of targets for farm credit, a quantum jump for irrigation, among other things.

Having done this, the Finance Minister should have given the delivery schedules. The Budget is resoundingly silent on implementation of these crucial programmes though the Finance Minister admits, for instance, that the farm extension system "seems to have collapsed." The latest Economic Survey observes that, "the availability of resources alone will not guarantee... development." Unredeemed promises sour quickly and that can prove fatal for the Government in its second half in office.