Pragmatic and realistic. Boring and unimaginative. These are the two sets of phrases being used by experts to describe Pranab Mukherjee’s Budget. Those who support him contend that he has chalked out a long-term road map for growth (especially rural) and all policies (particularly related to disinvestment and FDI caps) needn’t be fleshed out in the speech.
His critics feel that this was a budget of “hope and expectation” and that the finance minister has failed the country in these respects. He hasn’t announced any big-bang reform. So, what’s the Budget 2009-10 all about?
For one, it’s clearly an election-oriented budget (a few state elections are around the corner), with a thrust on aam admi and inclusive growth. This explains the huge hikes in spending on social and welfare schemes. Prime Minister Manmohan Singh admits that it is a rural-oriented budget.
At the same time, it tries to give a few sops to the urban, middle class. However, it still remains to be seen whether corporates will pass on the benefit of the removal of the fringe benefit tax to their employees.
The fact is that most employers passed on the impact of this tax to their work force and, given the current slowdown, they may be more keen to retain the benefits for themselves. Although some relief has been provided to the new pension scheme, the fact is that its earnings will still be taxed at withdrawal.
The stock market too is unhappy as it was expecting major changes, like a cut in corporate taxes. Even in the case of some of the measures that can boost the prices of certain stocks, the impact is uncertain.
For example, the policies on the infrastructure sector may only help a few projects and not have an overall sectoral impact. Similarly, it remains to be seen whether this Budget can further boost rural demand, which has grown faster than urban demand in the past few months. Therefore, the impact on GDP growth remains a question mark.
One only hopes that this is the first step in the right direction. That this government will announce growthoriented policies in the coming months so that the economy gets back on track. As Mukherjee admitted, everything can’t be done through the instrument of the budget. We just pray that India’s financial king listens carefully to his bureaucratic Kautilyas.
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