The Union Budget 2012-2013 - Pre-Budget Musings!
Attention is riveted upon that great piece of document what passes for as Union Budget to be presented by the Central government. All kinds of speculations are rife. A housewife to a business ,everyone is curious about the possible contents of this document. It is not at all surprising that such a vast cross-section of the populace takes such tremendous interest in it as the budgetary proposals concern matters which affect the lives of all of us. Down the decades we have had some great budgets which were hailed as landmark ones like the one presented by Dr. Manmohan Singh in the early-90s as Finance Minister. In fact, many experts went to the extent of describing him as "Father of Indian Economic Reforms". Mr. Chidambarm who is the incumbent Home Minister had a few successful budgets credited against his name.
A few words need be told about the budget this year. As is fairly well-known that the Budget session of Parliament has two parts which normally commences in the last week of February and after the budget is presented Parliament goes into recess for three weeks during which various Standing Committees of Parliament examine the budgetary proposals. Budget session of Parliament resumes in the last of April to continue till the third of May. It is noteworthy that this year budget session of Parliament has not started as usual in the last week of February,2012 because of the ensuing elections in different parts of the country and it due to commence on 12th March with a joint session to be addressed by the President of India. The Finance Minister Mr. Pranab Mukherjee will come up with the Union Budget 2012-2013 on 16th of this month. It is quite evident that the outcome of electoral results would have a significant bearing on some of the budgetary proposals. While a victory for the ruling combine at the centre would definitely encourage the government to implement some of the unpleasant plans and a setback might see it going for a populist one. Now it is time to examine the state of the economy and the options or leeways available to the Finance Minister.
The Indian economy was on a higher orbit of growth beginning with the period 2003-2004 and ending with the year 2007-2008 and then entering a plateau phase. The developments in the USA and Europe have largely contributed to the current phenomenon of sluggishness in growth of Indian economy. Therefore, the Finance Minister has an unenviable tasks of injecting dynamism through his budgetary exercises into the economy to bring it back on the path of higher growth of the early and mid years of the last decade. What must have disheartened and disturbed the analysts of Indian economy are the disclosure of GDP data for third quarters recently which highlight negative growth at 6.1%. The manufacturing sector has taken a severe beating with its consquent impact on poor generation of employments. The unemployment scenario in India is alarming enough. And it is needless to say that stagnation,sluggishness and negativity would make it worse than ever before. Mr. Pranab Mukherjee has a big challenge in this regard and the entire industry would be watching his budgetary moves with great interest.
As has been mentioned earlier that India's dizzy growth rate during the period mentioned consequently helped to achieve a 32% of GDP as gross fixed capital formation in the year 2007-2008. A poor country like ours needs a faster growth rate to alleviate mass poverty and deprivation. Therefore it is extremely important for the Finance Minister as well as the country that all measures are geared up to attain a 9% GDP goal and looking at the global scenario when the largest economy of the world China has lower growth projections, the magnitude of the task of the Finance could be imagined. Of two issues which may greatly impede any progress in this regard is inflation and management of government finances. Inflation as we have already seen, badly impacted the manufacturing sector with higher input cost and poor bank credit with Reserve Bank of India tightening money control over the last few quarters.
Against this backdrop it remains to be seen how the Finance Minister goes about correcting imbalances on the fiscal front. The rising fiscal deficit has already caused widespread concerns leading to loss of confidence on the part of investors and delays in execution of projects. The government must strive to narrow down the deficit gap by expanding revenue base and restoring financial discipline by cutting down on unproductive expenditures. It would be watched with interest if the Finance Minister can come up with imaginative measures to widen tax base, mop up revenues locked in long-drawn tax disputes before various adjudicating authorities and give greater thrust to disinvestments in PSUs. Similarly his approach to management of subsidies which account for a substantial size too would come up for closer scrutiny. Recipients of subsidies should be rationally identified and it should be ensured that these reach out to the target groups and the anomalies existing in the present system are removed. Petro products and fertilizers are the ones which require such differentiation. There are other issues like greater initiative in clearing up the air in government policies as to coal and power, land acquisition and Foreign Direct Investment in certain core areas of the economy. Infrastructural development in India has suffered too much of neglect in recent years and here the Finance Minister must frame suitable policies towards encouragement of private sector by bringing in private capital.
Inflation has been the demon for the government for quite some time and the government has been seen to be struggling to tame it. Although the food inflation has been tackled somewhat, inflation in the manufacturing sector has been a continuing phenomenon and how the Finance Minister addresses it in his forthcoming budget remains to be seen.
On the agricultural front the farm sector deserves both attention and care. Farmers continue to suffer in the hands of village money lenders and reports of suicidal deaths still pour in from various parts of the country. Not only their credit needs, the government has to take a holistic approach towards ensuring steady supply of seeds, better irrigational facilities so that it may be possible to achieve higher growth in this vital sector. It is truly shocking that in the absence of cold chains facilities our hardworking farmers never get a remunerative prices for their produce.
The Finance Minister must be feeling the heat of widening fiscal deficit and what new efforts he makes to augment revenues, would be a matter of great interest. Any increase in the existing rates of excise duty would send negative signals to the industry which is already struggling with poor demands and lower margins. Similarly no expectations should be there in the form of any scaling down of existing rates in general. The failure on the part of the government to stick to the original time-table of implementation of Direct Taxes Code (DTC) and Goods and Service Tax has been one of areas of concerns and the forthcoming budget is expected to contain some major initiatives on the part of the government. In the matter of personal Income Tax, there is speculation that the threshold limit may come in for revision up to Rs 3 lac. The corporate sector too is hopeful that the Finance Minister may abolish payment surcharges and cess on corporate tax.
As the B-Day approaches, all sections of our society are looking forward to the presentation of a budget that goes to reasonably meet the expectations of the nation and its people and let us hope the Finance Minister rises to the challenges in fulfilling them.
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