Wasted window of opportunity

The Budget did not live up to the widespread expectations that the finance Minister, Mr Pranab Mukherjee, would help arrest the wobbly growth of the economy through some purposive and reform-oriented measures to rev up confidence among the real sectors of the economy.

Instead, a mixed bag of additional tax burden mostly in indirect and services taxes and best intentions statement were served.

The latter include insouciant and not resolute move to prune wasteful consumption expenditure to fix the fiscal mess that was originally the making of this government in its persistent crush with inclusive approach without finding the requisite resources through innovative revenue mobilisation move or credible expenditure management strategy.

Out of every one rupee the exchequer earns, 62 paise come from various taxes such as corporation tax, income-tax, Customs, excise duties and service tax and other taxes and the balance 38 paise mostly come from borrowings, non-debt capital receipts and non- tax revenue.

After providing for non-plan expenditure including subsidies and defence, interest payments, it could provide only 22 paise for Central Plan out of the every rupee it earns.

What kind of capital expenditure could be feasible in such a poor state of resource generation for development even under Central Plan is anybody's guess!

Mr Mukherjee did make a few sanctimonious statements in his budget pertaining to growth recovery, private investment, supply bottlenecks, malnutrition and governance matters, although the Economic Survey he presented a day earlier provided action in each one of these crucial areas to restore confidence and revive flagging growth impulses.

Fiscal tightrope

He made a mention of difficult fiscal management in the current fiscal and ascribed this to the shortfall in direct collections by a hefty Rs 32,000 crore reflecting slower economic growth.

He also conceded that the government absorbed duty reduction in petroleum sector with annual revenue loss of Rs 49,000 crore, even as the receipt document appended with budget papers estimates revenue foregone under the crude oil and mineral oil heads at Rs 58,190 crore (estimated) in 2011-12.

The Finance Minister did concede that as against an assumption of $90 a barrel, the average price of crude oil in 2011-12 is likely to exceed $115 dollars.

Then, why is it that he should continue to sacrifice this substantial revenue by not encouraging energy conservation efforts among users of petroleum and diesel?

At least in the case of petroleum, decontrol of price has been announced, while in the case of diesel even this is not flagged off lest this should kick up a shindy among the coalition allies, let alone from opposition parties.

Given the volatile global energy prices in view of the uncertainties in the West Asian region, the budget has not even bothered to unveil a credible strategy to curbing continued higher consumption of precious energy without ensuring the pass-through of higher imported cost on users.

No wonder the combined impact of lower tax and disinvestment receipts (against budgeted Rs 40,000 crore, the government may end up realising Rs 14,00 crore in 2011-12) and huge expenditure on account of subsidies of food, fuel and fertilisers, the fiscal deficit is well past the estimate of one per cent more than the budgeted 4.6 per cent of GDP.

Tax receipts

It is now reckoned at 5.9 per cent. To bring this down to 5.1 per cent in the inaugural year of the Twelfth Five-Year Plan when economic growth prospects continue to be subdued for India in the wake of adverse global economic situation, is going to be a herculean task.

It is this conviction coupled with the fact that most of the announcements including the various crumbs for individual segment of the economic agents do not really mean much that has led to the markets to show its morose reaction immediately after the presentation of the Budget.

It is nobody's case to argue that the budget is bad but in a situation such as that exists today, a lot is at stake. If only the Finance Minister displayed real gumption on the reform front by taking the bull by its horns.

The window of opportunity that was available to him this year has been wasted and next year being the penultimate one prior to the 2014 General Election, his options would only narrow and the gap on the fiscal front widen further, analysts caution.

geeyes@thehindu.co.in

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