Bereft of any big idea and with its focus on minutiae, the budget presented by Union Finance Minister Pranab Mukherjee disappoints as a political response to the perception of drift and the succession of scams that have emerged in the recent period. The Finance Minister has addressed desultorily three of the four problematical areas of political corruption, the play of unaccounted money in both the economy and the political system, Indian money stashed away in foreign accounts, and high inflation. He has been content with listing the ongoing efforts of the government in detecting and bringing back the money held in illegal foreign accounts, including negotiating tax information exchange agreements and double taxation avoidance treaties, its participation in international moves against tax havens, and the commissioning of a study on unaccounted income and wealth. Among the areas the group of ministers on corruption is examining are state funding of elections, the removal of the discretionary powers of government, and putting in place a competitive system of allocation of natural resources. Only on food inflation has the Finance Minister announced new initiatives and investments to increase the supply of specific food items such as edible oil, vegetables, pulses, and milk.
While the budget seems oblivious to the political context, on the positive side it will facilitate continuing high growth that is projected at 9 per cent for 2011-12. Its revenue-neutral character, the concessions in personal income tax and in corporate tax even if marginal, measures to boost investments in infrastructure and agriculture, the promise of pushing through reform legislation — including the constitutional amendment on the goods and services tax (GST), laws on insurance and pension funds and the new direct tax code — and information technology initiatives to streamline tax administration and the delivery of public services have had a positive impact on business sentiment. The introduction of an integrated GST will be a major move that will bring efficiency gains to the economy as a whole but there is still some way to go before all the States can be persuaded to get on board. The raising of the exemption limit for personal income tax from Rs.1,60,000 to Rs.1,80,000 has brought some cheer, even if it has fallen short of expectations. The lowering of the surcharge on corporate tax from 7.5 per cent to 5 per cent has boosted market sentiment, as have customs and excise duty concessions to specific industries. To raise revenue and also in preparation for the introduction of GST, the service tax net has been widened to include high-end medical and legal services even while retaining the rate at 10 per cent.
The budget has provided for significantly larger outlays on education, health, women and children, affordable housing, the Scheduled Castes and the Scheduled Tribes, and minorities. Overall social sector spending at Rs.1,60,887 crore will be 17 per cent more than last year, with the outlay on education rising by 24 per cent and on health by 20 per cent. The big idea of food security that was announced in the last budget is still to be operationalised with differences having cropped up between the National Advisory Council and the government on the target group, extent of coverage, and the estimates of the outlays that will be called for. One hopes that this very worthwhile programme will be finalised and put in place over the next few months. Mr. Mukherjee has announced the replacement of the present system of kerosene, LPG, and fertilizer subsidies by direct transfers of cash subsidies to people below the poverty line. It is true that in some contexts, typically in Latin America, direct cash transfers have transformed the delivery system, eliminated leakages, and ensured that the beneficiaries receive the full amount of the subsidy. But serious apprehensions have been expressed by progressive economists that in India, considering the extent of mass deprivation and the actual experience, cash transfers are becoming a substitute for — and even an excuse for weakening — the public provision of essential goods and services.
On the face of it, the government seems to be comfortably placed on the path to fiscal consolidation. The overall fiscal deficit is projected to come down from 5.1 per cent of the gross domestic product (GDP) in the current year to 4.6 per cent in 2011-12. With adjustments to exclude the capital expenditure incurred by the States out of the transfers from the Centre, the ‘effective' revenue deficit is expected to come down from 2.3 per cent of the GDP to 1.8 per cent. Yet, holding down the fiscal deficit may not turn out to be as easy as it is made to sound. If last year there was a bonanza from 3G spectrum auctions that provided headroom for higher spending, the Finance Minister has proposed to raise Rs. 40,000 crore through disinvestment in public sector units in 2011-12 even while holding out the assurance that the government will not relinquish majority stake or management control. In addition to the uncertainty over disinvestment, a major question remains over the impact of the food security legislation. Even on the limited scale that the government wants to launch it, an annual outlay of Rs.68,539 crore (or an additional Rs.11,500 crore over the current food subsidy) would be required. Another imponderable is the trend in crude prices that have risen sharply in recent weeks. Persistent high prices will leave the government with three difficult choices: increasing the retail prices of petrol and diesel, reducing the duties on petroleum products, and forgoing revenue or subsidising the under-recoveries of the oil marketing companies. Overall, it is not a budget that is calculated to capture the imagination of the country even as it has sought to maintain the growth momentum through minor tinkering. Many of the promised measures are not specific enough and are as yet for the future.
Keywords: Union Budget 2011-12, Pranab Mukherjee
There are both positives and negatives in this budget.There is a bit for every sector(especially auto and banking sector),common man, housewife, senior citizens in Budget 2011.The positives definitely outweighs the negatives.All in all the focus on infrastructure,agriculture will be give a boost to India's growth story and proviude impetus which is the need of the hour.The Government's decision to allow foreign individual investors/(Foreign Retail Investors) direct investment access to equity funds, floated by local AMCs, and to permit domestic mutual funds to sell such products abroad, will throw open a new window of opportunity for both global individual investors, local AMC.The overseas retail or high net worth individuals, who thus far have been investing in the 'India story' in a very limited way through ETFs or a registered FII, would now have a new entry point. Its a Win-Win situation. Budget 2011 presented by our Finance Minister seems to be a well balanced Budget.The only thing conspicuous by its absence is that there is no relief for the common man(middle-class) who pays big chunk of their salary as Income tax to the Govt.I don't know why everybody is so elated.What matters is having progress on the ground and at grassroot level.IT communication,rail and road infrasrusture in India is still pathetic.I can't see any real growth and improvement for the past 20 years.The divide between rich and poor is growing and not getting bridged.Miles to go...
Budget after budget, I do not find any genuine attempt to simplify direct taxation for senior citizens. Hardly 8% of population belongs to this band (60-plus); out of this only 20% (mostly dependent on interests on deposits or pensions) might be paying tax. This group happens to be the one that hardly benefitted from the economic boom. Still, we have them covered by complex taxing system expecting them to go to IT Offices every year and filing their returns. The simplest way to handle the IT from senior citizens was to ask banks deduct some 10% of the income of such citizens at source if the income was more than 10 lakhs, and sparing them from the rigours of filing returns.
I think it would be extremely unfair to call this a lackluster budget. Without any fanfare, a revolutionary reform has been made on cash transfer to the needy instead of subsidies (with their inherent leakages). Cold chain was another area where there were good initiatives made. Getting in GST will also be very good. I am truly amazed that there are people who are saying that they will not go out to eat as often because they will have to pay service tax on it. This is a good budget and has addressed all the right areas and politically non-controversial. The only complaint possibly is that all the numbers may not completely add up and the deficit will be slightly higher.
CASH TRANSFERS TO CORPORATES:: The burning issues the country faces today i.e. Price rise, corruption, Indian black money in foreign countries ,is not properly addressed in this budget. The total amount in 2 GSpectrum and B band Spectrum scam exceeds Rs3.75 lakh cr. can easily be utilised for national food security scheme. When our PM himself compare the 2.76 core i 2 G spectrum with food subsidies, who can save this country? It is a good idea to make subsidy payment directly to individuals. Let Mughesh Ambani and Retan Tata etc get their due share directly without involved in such scams.
HELPING ROBBER BARONS:: Inflation, price rise and pervasive corruption douse the flame of economic growth the ruling party leaders flaunt as a big achievement of the UPA government. Elementarily, economics is the art and science of the production and distribution of wealth. Equity is an imperative component in the process of distribution for social justice and the prevention of concentration of wealth in a few hands. In popular concept, the government exists to prevent the malevolence of wealth concentration. When any government fails in this respect and becomes an agent in helping the corporate barons to concentrate wealth in their hands, the subjects switch to anarchy. This is what we see these days globally. We had had amidst us not long ago the role model who educated us about the evils of confining wealth to a microsopic minority: the Mahatma. Our present leaders, who profess Gandhism, practise what it is diametrically opposed to.
Even though the title says a lackluster budget, the contents reveal that the budget is indeed good. The move to issue the subsidy directly will eliminate unnecessary wastage and corruption and ensure that effective use of the money spend for the subsidy.
He need not capture the imagination of the country BUT could have taken very bold steps buoyed by the extra-ordinary collections through 3G auctions & almost Rs 45,000 crores more of tax collections over the 2010 BE. If this will not motivate a FM to take very strong measures, then I don't know what will! Most of the 'positive' steps mentioned are administrative measures already on te anvil - e.g., GST is on board for the past 4-5 years, DTC is on for an year, Measures to check corruption, black money etc., What has the FM done to boost the HDI in a big way - we are 49 ranks below Sri Lanka? Anything on the housing for BPL? Merely talking of Growth is not adequate, we need INCLUSIVE GROWTH. We are a Nation with more than 50% BPL with the benchmark of $ 1.25 per day and it becomes 80% with the WB's revised benchmark of $ 2 per day. Totally lacking in any measures for them - merely increasing the funds for NREGA will not solve the problems. This is a most disappointing budget given the hugely comfortable fiscal position - easily the best of the past decade.
The budget has nothing for the middle class, he most honest taxpayers in the country. Health care costs will go up with the taxing of 'AC hospitals'. I don't understand this mindset of the Finance Minister.In a city like Bombay most of them have air conditioners, it does not imply that the customers here are rich. Even hospitals like Lilavati or Hinduja, most of the patients are the from middle class strata. My uncle was admitted here and when I used to stay at the hospital I used to see the hospital staff reminding families of those admitted there on a weekly basis how much they must pay up. Every time the reminder used to come, people used to be uncomfortable, thinking of the money they have to cough up.They were not the elite as the FM thinks them to be. Given the bad shape of public hospitals , where will one go if one has to provide decent medical facility to ones loved ones. The FM is not grounded to reality.
TRUE BUDGET NUMBERS:: The budget is again a neo-liberal exercise masquerading as Pro-People: The Union Budget 2010-2011: A lackluster effort with no real focus. No monetary reforms to curb price-rise, no efficient road map to curb Black Money, No solid plans for agriculture(as Dr. MS Swaminathan, father of Green revolution pointed out. )Spending in Agriculture sector last year is Rs.1,40,000 crore, this year's budget allocation is only Rs.1,36,000 crore... and they say the budget focuses on agriculture sector. Last year's expenditure on Food Security Sector was Rs.60600crore. This year's budgetary allocation only Rs.60577crore, and they say the Budget focuses on Food Security. Subsidy, including the one for fertilizers cut by Rs.20000crore and they say they are helping the poor and farmers. The prime Minister himself admits that 73% of farmers are out of Banking network, now the Agriculture loan has raised to 4.45lakhcrore from 3.45 lakh crore. and they cut subsidies for fertilizers. How the millions of farmers outside the banking network can benefit? The fact is that 60% of last year's agri-loans were disbursed at METRO-BRANCHES of main Banks. Now tell me who the beneficiaries were? Export duty on Agricultural produce will lead to severe crisis in Kerala. No word on Taxes forgone (concessions to corporate), which amounts to 5lakh crore rupees. More allocation to Education and Health are welcome steps..But is nowhere near the promised 3% of GDP.
It could not be received without misgivings about the successful implementation of 'the replacement of the present system of kerosene, LPG, and fertilizer subsidies by direct transfers of cash subsidies to people below the poverty line'. Given the functioning of the distribution outlets, intended cash subsidy may not reach the targeted BPL people.Diversion of subsidized rice from PDS outlets to neighbouring states is common knowledge.Cash subsidy may trigger corruption along the distribution channel.
FM has a tight rope to walk. One side there is a pressure to continue the momentum of growth when there is a sign of slowing manufacturing growth and corporate profit and other side to check inflation and so that the money which is reaching through various welfare schemes to poorer must not become elusive. Decreasing FDI is also worrying because it's need of the hour to heavily invest in infrastructure and in human resources to support economy to become inclusive and sustainable. Despite all he have fair chance to steer the the economy but problem with this goverment is that they are curing the symptom not the disease and passing the buck.They had taken 9 percent growth for granted while believing that demography will do the rest without effectively implimenting sound policy.i belive that if the govt reaches out to the farmers of this country not by just granting loan (which mostly helps landlords and businessmen not the ordinary farmer who are getting dragged out by banks) but by sound policy which will ensure that credit and benefit reaches to them and they have reached the consumer of urban areas it will help in two ways: one, by checking food inflation and other that empowered farmer will create demand in rural India. Mr FM, help them out.
Continuing price rise is the problem which is hurting bulk of the people most and the Finance Minister has no solace to offer to them except expressing pious hopes that the rate of inflation will come down soon. The economy may be growing, but ironically along with it life is becoming more and more difficult for a very large section of the population which is not a direct beneficiary of such growth. Incessant recitation of the "growth mantra" may enthuse the share market, the panelists in electronic media news room discussions and the rich and the upper middle class; but for the majority of the people in this country, it will make no difference. One can almost hear the government asking: so what?
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