It is fashionable and, for most people, costless to berate the Budget every year. So, predictably, the Budget for 2012-13 has been dismissed by instant commentators on TV as a “tinkering” one, which lacks “vision”. And in some minor ways it is that.

But it should not be overlooked that it was framed in exceptionally difficult times politically. The contours of those difficulties are well known and need not be recounted.

Suffice it to say that the real extent of those difficulties became apparent within an hour of the Railway Budget being presented on March 14.

In a wholly unprecedented and unexpected tantrum Ms Mamata Banerjee demanded the removal of her partyman as Rail Minister.

As well she might, because she doesn't want to give the CPM any stick to beat her with in West Bengal, and the fare increase was a rather large one.

In the process, however, her party has become indistinguishable from the CPM. What a denouement!

Had Ms Banerjee's tantrum happened before the possibility of the Samajwadi Party becoming an ally of the Congress, the Government would have been disarray. But now that it has an alternative, it seems to have decided to get on with it.

Trailer

I can say with some confidence that the Budget is only a trailer. By this time next year, a huge amount of reform would have been done, slowly, in unnoticeable bits — such as the reduction in the EPF rate and the hike in rail freight rates three weeks ago. Not for nothing did the Prime Minister say some weeks ago that 2012 would not be a repeat of 2011.

Economically, too, the times have been hard. GDP growth has slipped below 7 per cent, and the global economy, barring the US which is recovering, has become a cause for serious worry.

The Finance Minister thus had to solve two big problems. One was the fiscal deficit which was a victim of unexpected natural and man-made events in Japan and Europe; and the exigencies of competitive populism.

The other was (and continues to be) the dependence on volatile capital inflows which can flow out at short notice. Indeed, unless the deficit issue was seen to be tackled, these inflows could quickly become outflows as they had done in 1990 — the memory of which still haunts North Block and the Reserve Bank.

Compounding this was the high inflation, some of which is because of domestic supply shortages and bad monetary policy until a year ago; and some of it is because of high and volatile commodity prices, especially oil.

Good job

In the event, given the severe limitations on the Government's freedom of action imposed by coalition politics, the Finance Minister has done well.

There are only two ways of reducing fiscal deficits. One is to reduce expenditure and the other is to increase revenues. Nothing very startling has been done on reducing expenditure.

This is not feasible at this juncture because it involves politically unacceptable cuts in subsidies. But here too, the Finance Minister pulled off a little trick: he said subsidies would be kept within 2 per cent of GDP.

The Opposition MPs missed implications of this. If adhered to, the promise means severe cuts in subsidies over the next three years, mostly to diesel and gas.

But on the revenue front Mr Pranab Mukherjee has displayed some very clever footwork. Not the least of these is the “clarification” that nulls the Supreme Court judgment in the Vodafone case.

The ruling essentially exempted the company from paying taxes on its purchase of Hutchinson's Indian mobile businesses, as the deal had been brokered offshore.

So now that hapless company has to pay at least $2 billion (Rs 10,000 crore). If a penalty is imposed, the amount could be even more.

The only too-clever-by-half bit in the Budget is the lifeline thrown to Rajya Sabha MP, Mr Vijay Mallya. He will soon be able to get money from abroad to save his airline.

But then, why not? It used to be a nice airline.

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