Yet Another Lacklustre Budget That Turns Sharp Left

Yet another lacklustre budget that turns sharp Left


If anyone in India was expecting a kick-start to the economy via the Union Budget presented in parliament by veteran leader and Union Finance Minister Pranab Mukherjee on Monday, then he or she would be sorely disappointed.

The presentation was a tinkerer’s effort, defensive, lacking in accountability, navel-gazing in its self-absorption and band-aidism; and reeking of its self-serving politics of “inclusivism”.

No-one in his right mind does not want to help the poor or underprivileged in this country, but to attempt to do so at the expense and exclusion of the haves is extreme populism of the kind that was the hallmark of the Indira Gandhi socialist years. But it seems to be yesterday once more in 2009-10 with a slew of expenditure programmes that show no real source of income other than an ever growing programme of deficit financing.

Sure, the budget emphasises infrastructure development with an increase in allocation (23%) for the much delayed roads sector; and radically increases spending for farmers and the rural poor in particular, while not entirely forgetting the urban poor either.

But, in terms of the grand intent, the actual allocations, still constitute dribbles and drabbles in absolute terms, given the size of the constituency being addressed, unlikely to go very far to alleviate conditions even in these two or three thrust areas. Besides, the approach being taken is one of providing immediate relief for the distressed rather than creating a reusable resource, except for the rural roads programme and the thrust to the highways programme nationally.

But then, how can it, without simultaneously pump-priming and helping those sections of the economy, namely India Inc. that earn most of the money and accounted for most of the 9% growth we experienced during a part of the UPA I Government? But today India Inc. is suffering the effects of both low domestic demand and the global recession. But for this section, there is little concrete except sympathy and empathy and the tinkering with a few tax heads.

The Budget has not only under-whelmed the Stock Markets which fell 900 points in response, but also almost every constituent of modern, non-rural and poor India including industrialists, corporate employees, professionals of various hue, India watchers, and the important FII and FDI contingents.

The timid disinvestment target of just Rs. 1,100 crores is a case in point considering the size of the public sector that runs into over Rs. 100,000 crores.

But, it appears UPA II is concentrating on the voters, right from the start of their new term in office. And they have identified their core constituencies in the fields and huts of rural Bharat. It has calculated that the disappointment of India Inc. and the global investment community seeking growth in India is worth the candle, if in the bargain they gain the support of the all important and comparatively numerous aam aadmi.

Indeed, it appears that even as the Left has lost a good deal of voter support, the space vacated by it is being usurped at the first opportunity by the decidedly left-leaning new UPA Government.

But if these measures, such as they are, help revive the agricultural sector, fallen to a growth rate of 1.7% in 2008-09 from 4.7% the year before; it will prove to be salutary.

But are measures such as: targeting agriculture credit of 3.25 trillion rupees, arranging for the payment of additional interest subvention of 1 percent to farmers who pay short-term farm loans on schedule; the provision of an additional 10 billion rupees over the interim budget for irrigation; the extension of agriculture debt waiver by 6 months and recasting farm subsidies on fertilizers towards nutrient-based assessments and even direct subsidies to farmers, going to be enough?

Or are we plugging a leaking dyke by this outdated socialism when the situation is crying out for massive modernization and overhaul using bold new initiatives that are completely missing in this budget?

There is more for the small man in this budget: some 40 billion rupees to encourage lending to small firms, 1 billion rupees for banking services in unbanked areas, 391 billion rupees for rural jobs programme in 2009/10 , 144% more than in 2008/09.
The rural roads scheme allocations will go up by 59 pct in 2009/10. The Bharat Nirman infrastructure programme will receive an enhanced funding of 45%. And there is going to be a further 70 billion rupees for the rural electrification scheme. Another 20 billion rupees will go to rural housing under the National Housing Bank.

All this might make the intended recipients of the Union Budget’s focus, farmers, small businesses and the poor, somewhat happy; though the largesse intended for them is neither large nor game-changing in nature.

But what is difficult to understand is which component of the budget will act towards achieving the Government’s intentions to return the economy to the path of 9% growth once again in the shortest possible order.

It is hoped, no doubt, that the emphasis on infrastructure will stimulate the core sectors of the economy and result in this growth. It is possible that the export tax sops will stimulate this moribund exports sector but again will extending interest subvention to exporters in 7 sectors till March 2010 do the needful?

The banking sector has welcomed the removal of certain taxes in exchange to the enhancement of certain others but they too seem to be making the best of a bad job.
Even in the matter of removing subsidies on petroleum products, long in the air, there is no definitive commitment beyond saying it needs to be done and that there will be an expert committee set up to go into it.

Similar vague assurances have been given in the matter of increasing the production and availability of LPG. And not to forget the disaster affected, there is even an allocation of Rs. 5 billion to prevent further floods in Mumbai.

There are some tiny concessions to pensioners and individuals in terms of tax relief; too small to bear mention, keeping in mind the consumer price index and the prospects of a slow and painful recovery for India, predicated almost entirely on the revival of the global economy.

Just as inflation fell in 2008 at last when oil prices plummeted, so will we see revival when international revival raises all boats including our becalmed Indian ones too.

(1,061 words)

6th July 2009
Gautam Mukherjee