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The Union Budget 2011-12 presented to Parliament on Monday by the veteran Finance Minister, Mr Pranab Mukherjee, has not only failed to galvanise growth impulses by providing a favourable policy framework, but also squandered a one-time opportunity to roll out credible expenditure management in the long-term fiscal fitness of the economy.
The oft-cited compulsions of coalition and imminent elections to five important State assemblies have rendered the budgetary exercise a toothless tool, without making any serious attempt to spread tangible benefits to the real sectors of the economy, leaving millions of marginalised to groan under inflationary burden with little respite.
Biting reality
It has now become a cliché that year after year the UPA Government is content with proclaiming that its Budget aims to “sustain economic growth, strengthen infrastructure, moderate the price rise, particularly of agricultural produce and reduce social imbalances”. But the biting reality is remote and removed even from a semblance of resemblance to this tall claim.
With none of the second-generation economic reforms anywhere near being pulled out of the drawing board for far too long and inflation impacting the poor as the cruellest form of taxation, the alignment of all indirect tax rates such as customs, excise and service tax to 10 per cent as a pre-cursor to the Goods and Services Tax (GST) may not serve as any relief to people with no income or with small income that is not indexed to inflation. The poor also pay or get laid by indirect taxes in their consumption.
Nurturing infra projects
For building physical infrastructure, an area successive governments in the past a major portion of which was occupied by the Congress neglected to such an extent that it had really become a binding constraint to India's ambition to be a developed country, mere step-up in public outlays by 23 per cent or giving government undertakings in infrastructure domains such as railways, ports, housing and highways development to raise Rs 30,000 crore tax-free bonds would not be suffice.
With most of the infrastructure projects being in the nature of public-private partnerships (PPP) paradigm, the comfort level of private investors in terms of betting their precious money on long-gestation projects with no assured comfortable returns till the project is commissioned or due regulatory regime that would intercede effectively in potential rows between the authorities and the private sector over the contracts, the ambition of attracting massive private investment into this crucial area would remain doubtful and not doable for a long time.
Revenue receipts
It is small solace that corporation tax leads the pack of revenue receipts as it contributes to 24 paise for every one rupee the exchequer earns! If the authorities do not see the importance of nurturing infrastructure and venture capital and start-up companies for a few years before they find their feet in the quagmire of unregulated markets, no investor worth his salt would price his risk in capital-intensive projects. Either the government should promote competition in a healthy way by putting in place sound regulators to monitor the wiles and guiles of shady elements and cull them duly or provide right fiscal incentives to genuine ones so that they develop the confidence to build and contribute to the nation-building. This message has not been given by the Budget, though it talks at the end pompously that “…let us all build an India”.
The least the government could have done in the Budget is to exempt long-gestation infrastructure industries start-up or venture capital companies or developers or units in the Special Economic Zone (SEZ) which carve out their own infrastructure in an exclusive area from paying the minimum alternative tax (MAT) so that they could spare resources to build their projects to see they get off the ground with no glitches.
But this plausible expectation is thwarted by a lack of understanding among the mandarins in the North Block who do not see eye to eye with the Government of the day but interested only in extracting revenue from every opportunity. The extant MAT has also been hiked by 0.5 per cent to 18.05 per cent to aggravate their cost disabilities.
For Bharat
As the gap between increase in the plan expenditure at 18.3 per cent and non-plan expenditure at 10.9 per cent even in nominal terms is not big and very minuscule given the high inflation, the Budget allocation for the Ministry of Rural Development that runs several flagship programmes for Bharat (the real India as India lives in its villages), for the next fiscal is lower at Rs 87,800 crore against Rs 89, 340 crore budgeted and revised at Rs 89,578 crore for the current fiscal.
Again the Ministry of Agriculture gets a Plan outlay of Rs 13,662 crore for the next fiscal against the revised figure of Rs 14,049 crore for the current fiscal, testifying to the UPA Government's overt commitment to kisan welfare.
In fine, the Budget is long on cosmetics but woefully short on substantive gains to the real sectors and to the man in the street.
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