Budget 2012: Key observations of the finance minister
March 29, 2012Key observations of the finance minister in his Budget speech and thereafter.
ON HIS JOB:
The life of a Finance Minister is not easy. Various players participate in the making of the economy. When everything goes well with the economy, we all share in the joy. However, when things go wrong, it is the finance minister who is called upon to administer the medicine. Economic policy, as in medical treatment, often requires us to do something which, in the short run, may be painful, but is good in the long run. As Hamlet, the Prince of Denmark had said in Shakespeare's immortal words, "I must be cruel only to be kind."
ON HIS INTENTIONS
In drawing-up the Budget proposals for 2012/13, I have focused on strengthening domestic growth drivers, encouraging private investment to regain its pre-2008 crisis growth momentum and addressing supply constraints in infrastructure and the agriculture sector.
The aim is also to ensure that the benefits of growth reach all sections of the population. India stands on the brink of a major resurgence.
A critical element of the strategy is to implement an ambitious but realistic fiscal consolidation road map, and leverage technology to give effect to a quantum improvement in the government's expenditure management
ON THE BUDGET NUMBERS
I would like to assure that we are committed to protecting the credibility of the numbers that you have seen in the Budget proposals. All required measures will be pursued in putting the economy back on the high growth path.
The domestic investment environment has suffered on multiple counts in the past year. It is time to fast track policy decisions and ensure on-time implementation of major projects.
When Chanakya talks of Koso Moolo Dandah in the Arthasaastra, he makes the important point that the treasury and its inflows are the source of a nation's might. The role of direct taxes in maximising revenue flows is well documented... Direct taxes are preferred because they can be related to the ability to pay, be progressive in nature and promote equity.
ON WHAT WENT WRONG
Our fiscal balance deteriorated in 2011/12 due to slippage in direct tax revenues and increased subsidies. On both counts our underlying assumption at the time of the Budget presentation last year was belied by subsequent developments.
ON HIS CHALLENGES
The continuing uncertainty in the global environment makes it necessary for us to strike a balance between fiscal consolidation and strengthening macroeconomic fundamentals to create adequate headroom to deal with future shocks.
The major subsidies at the Centre are for food, fertilisers and petroleum products. Some subsidies at this juncture in our development are inevitable. But they become undesirable if they compromise the macroeconomic fundamentals of the economy, more so, when they don't reach the intended beneficiaries. All other subsidies will be funded to the extent that they can be borne by the economy without any adverse implications.
The decision in respect of allowing FDI in multi brand retail trade up to 51 per cent, subject to compliance with specified conditions, has been held in abeyance. Efforts are on to arrive at a consensus in consultation with the state governments.
ON FOOD AND WATER
To ensure that the objectives of the National Food Security Bill are effectively realised, a Public Distribution System network is being created using the Aadhaar platform. A National Information Utility for the computerisation of PDS is being created. It will become operational by December 2012.