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It's a Budget that made nobody greatly happy nor anybody deeply unhappy.
The ordinary taxpayer cheered the small addition to his pocket by way of a hike in the exemption limit offered by the Finance Minister, Mr Pranab Mukherjee. But bemoaned the across-the-board 2 per cent hike in excise duty and service tax, and the widening of the service tax net to all services except 17 categories in a “negative list”. This will make most goods and services costlier.
Industry cribbed about the excise duty hikes and the lack of reforms in the Budget but welcomed the Finance Minister's attempt to rein in the deficit and curb subsidies.
Even the markets went two-paced. After rising by over 1 per cent during the initial part of his Budget speech, the benchmark BSE Sensex fell to its lowest in more than a week, down 1.2 per cent by close of trading at 17,466.20 points.
The Minister “played it safe,” said Mr D.K. Agarwal, Chairman of brokerage firm SMC Investments and Advisors.
“I have to be cruel only to be kind,” the Finance Minister said before announcing his tax proposals, switching poets in the process from Tagore to Shakespeare. But his “cruelty” was limited to industry and the largely urban taxpaying sector.
Mr Mukherjee played it safe by ensuring that the Government's spending on social sector schemes, especially the ruling UPA's flagship schemes were stepped up, while UPA Chairperson Ms Sonia Gandhi's pet Food Security plan was promised “full” funding. The Food Security Bill is yet to be passed by Parliament.
However, the veteran administrator (Mr Mukherjee became the Finance Minister for the first time in 1982) drew on his vast political experience, as well as his previous stint in North Block, to roll out a Budget that was strong on basics but a throwback to the 1980s in its swing towards a heavy reliance on indirect taxes to shore up sagging revenues.
“I have made a determined attempt to come back to the path of fiscal consolidation in the Budget for 2012-13 by pegging the fiscal deficit at Rs 5,13,590 crore, which is 5.1 per cent of GDP,” he said in his speech.
That appeared realistic, going by the current year's deficit level of 5.9 per cent, which was wildly over the 4.6 per cent he had budgeted last year.
That reduction is to be largely brought about by capping the outgo on subsidies to 2 per cent of GDP.
Sensitive areas not touched
However, the politically savvy Mr Mukherjee steered clear of touching such sensitive areas as freeing up diesel prices, axing kerosene and LPG subsidies, or fertiliser subsidies.
The rest of the gap will be hopefully bridged by the hiked excise duty (an additional Rs 27,280 crore) and additional revenue of Rs 18,650 crore from service tax. In addition, he has budgeted Rs 60,000 crore from spectrum auctions as well as Rs 30,000 crore from disinvestment in state-owned companies.
The Budget could portend some much-awaited reforms. The next few weeks will tell.
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