Finance Minister P. Chidambaram, presenting his eighth Budget, did not have too many options before him. As such, he had to tread softly, which he has done admirably.

The Budget for 2013-14 has been carefully drafted with no great surprises and certainly nothing that will upset large swathes of the voting public. After all, the elections could be held as early as November this year.

A ‘bad’ Budget, coming on top of the high inflation of the last five years, would be the last thing that the Government needs. On the other hand, in an election year, the voters expect some handouts, which they have not got. The middle class, in particular, will dismiss the Budget with the contempt it does not deserve.

Nothing objectionable

That is why the main thing about this Budget is that it will not do any harm. God-willing, it may even do some good.

There are a large number of desirable social schemes, populist schemes, changes directed at the stock market and even a lunge at the super rich and the no-so-rich. These, on the whole, are quite unobjectionable proposals.

Indeed, there are also two schemes directed at women. Sonia Gandhi and Sushma Swaraj could be seen clapping on hearing of these.

There will be a Nirbhaya Fund whose purpose has not been spelt out and there will be a public sector bank only for women. They will cost the taxpayer Rs 1,000 crore each.

But past experience shows that such blatant proposals are somehow sabotaged by the bureaucracy or the Reserve Bank of India. We will have to wait and see how purposefully the Finance Ministry pursues these two schemes.

Benign Budget

Chidambaram deserves to be congratulated mainly for presenting a benign Budget. This is important because of the background of the last three Budgets which, in many ways, had been reminiscent of the Budgets of the 1970s.

In that context, those who had expected Chidambaram to reverse some of his predecessor’s decisions will not be happy.

The Finance Ministry would have liked to reverse them but its room for manoeuvres was very limited. It needs the money very badly.

The re-introduction of the investment allowance will be welcomed, at least by those firms wanting to invest. The Indian economic environment is a high-cost one and any little relief will help.

However, given the way in which this allowance was misused for over two decades until its abolition in the mid-1990s, the Government will have to be wary. Or at least not complicit in accounting tricks by firms.

That said, the stock markets will gripe about the dividend distribution tax and the doubling of surcharge on domestic firms with taxable income of over Rs 10 crore. A proportionate increase has been made for foreign firms also.

However, the imposition of the CTT is not a great move and could have been avoided. There are bound to be protests which the Government could have done without.

For me at least, the main point of interest was what Chidambaram would do to attract inflows, or at least keep them stable.

Could not have done more

It is good to see that he has not done anything that could have a destabilising effect. The importance of this cannot be understated because all indicators are pointing to a severe stress of foreign exchange reserves towards the second half of this year.

With exports not likely to show any major increase in the near future, and imports steady (with the bill rising), the deficit in the current account must be financed by a surplus in the capital account.

All in all, given the circumstances, and whatever the Opposition says, Chidambaram has presented a good budget.

He simply could not have done more — or less.

(This article was published on February 28, 2013)
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