Oh, what a Budget! If there is a Nobel or an Oscar for the Best Budget of the year, Pranab Mukherjee will undoubtedly run away with the award. Even American President Barack Obama will be jealous of Mukherjee for producing such a miracle budget, especially when the world is reeling under the worst economic slowdown in recent years.
“Look at India and China,” Obama has been telling Americans how to live with recession and make the best out of the ruined economy. India has not only recovered from the slowdown but is also set for a higher growth rate of around 8%. Except the hike in fuel prices by way of excise and customs duty on crude oil and petroleum products, the
Finance Minister was able to please all sections of society with liberal tax reliefs and incentives, aimed mainly at the salaried class and the aam aadmi. Only the opposition parties were crying wolf because of the fear of inflation going up further, and rightly so. The salaried class gets an unexpected windfall ranging from Rs 20,000 to Rs 51,000 a year in income-tax reliefs. The10% tax slab has been raised from Rs 3 lakh to Rs 5 lakh, 20% tax slab has been raised to Rs 5 lakh-8 lakh from Rs 3 lakh-5 lakh and the 30% slab begins at Rs 8 lakh.  Of the 40 million individual tax payers in India, 60% or 24 million will benefit from this change of slabs. Contributions to Central Government Health Scheme up to Rs 20,000 are exempted from tax. Besides, investments in infrastructure bonds amounting up to Rs 20,000 are tax-exempted. A social security fund for the workers of the unorganised sector is also commendable. Most Indian corporates too have  reason to be happy with the surcharge on corporate tax coming down from 10% to 7.5% though some will be unhappy about the minimum alternate tax (MAT) being hiked from 15% to 18%. The loss of Rs 26,000 crore on the direct taxes will be more than offset by a revenue gain of Rs 46,500 crore in indirect taxes by raising the excise duties from 8% to 10%. The excise duty rate, the peak customs duty rate and the service tax rate have been set at 10%, preparing the ground for the introduction of a unified Goods and Services Tax (GST) next year. With our economy being projected to become the second largest in the world, after China and ahead of even the US, the Finance Minister has created a growing sense of optimism among the people.

However, the two major worries of the Government should be the growing fiscal deficit and the rising inflation, especially food inflation. Mukherjee says the deficit will come down to around 5.5% from the current 6.8% in the coming year. This may not happen because the budget is based on mere assumptions -- revenue and expenditure assumptions. At the end of the year, the Government may be left with less revenue collections and end up with more expenditure because of unexpected expenses caused by natural calamities like drought and floods, shortage of agricultural produce and hike in international oil prices etc. So, instead of reducing the deficit, it may shoot up. When
the deficit is staring at the Government, it is difficult to understand why the Finance Minister has taken the populist route and given hefty tax reliefs to individual taxpayers and the corporates. Do you know, one out of every three rupees spent by the Government is borrowed money?

Inflation, which was in the negative some six months ago, has shot up to 8.6% at present while food inflation is hovering around 17-20%. And the increase in the prices of petrol and diesel will have a cascading effect on the prices of other goods and services, compounding the 2 percentage increase in excise duties. The tax reliefs given in the budget will be neutralised if inflation goes up unchecked.

The excise duty and the customs duty on diesel and petrol go to the Government. The public sector oil companies, which are reeling under huge losses, will have to be partially compensated by increasing the prices of petrol, diesel and other petroleum products. The Kirit Parekh committee has, in fact, recommended decontrol of petroleum prices. Though the Government is unlikely to take a decision in favour of decontrol, another hike in petrol and diesel prices is inevitable, fueling the fire of inflation further.

In view of the food crisis, the focus of the budget should have been on agriculture. The Finance Minister wants to take the green revolution to Bihar, Jharkhand, West Bengal and Orissa, for which he has proposed to allocate Rs 400 crore (sic). He also gives a paltry amount of Rs 300 crore for creating 6,000 pulses and oilseed villages in the north-east region of the country. No amount of incentives to the farmers will help boost production as productivity of the soil is diminishing with every crop. Agriculture calls for another revolution and a lot of investment should go into R&D, high-yielding varieties of
seeds, irrigation facilities, post-harvest storages, cold chain to preserve fruits & vegetables, contract-farming, better food management and so on. The budget is very disappointing as far as allocation to this sector is concerned. Agriculture indeed needs a stimulus package.

The expenditure on social inclusion programme like NREGA, now renamed Mahatma Gandhi National Rural Employment Guarantee Scheme, has remained essentially stagnant at Rs 40,100 crore compared to Rs 39,100 crore last year, which means a decline in real terms.

The budget mentions about the Government’s plan to enact a national food security law. What the law can do if sufficient food grains, pulses and oil seeds are not produced in the country? The Constitution already provides the right to food and the right to education. Do all the people enjoy the right to education? The focus should be on producing more food, without which the law will be redundant. The right to food should cover all the people, not those below the poverty line alone. And, has the Government got any true account on the number of people who are below the poverty line. The economic survey recommended that the people entitled to BPL benefits should be revised upwards to include at least 50% of the population. The Tendulkar Committee earlier found that 41.8% of rural households and 37.2% of all households are below the poverty line. How come we are still so poor when we boast of 8% national growth, second only to China? Those who earn Rs 500 a month in the rural areas and Rs 700 per month in the urban centres, that is on an average Rs 20 per day (a little under 50 cents), are classified under the BPL category. All the poverty figures are either faulty or the Government wants us to believe those figures. The fact is that even a beggar in Mumbai makes more than Rs 20 a day. The Government, therefore, should set new norms to categorise those below the poverty line and find out the correct number of people who really need support. In western countries those who earn below $1.25 per day are included in the poverty list.

Population bomb is more deadly than the terrorist bomb. The Government doesn’t seem to have a programme to control the exploding population. Sanjay Gandhi did it during the Emergency with some success. But the cruelty and excesses with which it was implemented and the negative publicity it received, no one since then had dared to take up the issue of family planning. The message of “Hum Do, Hamare Do” has somehow got lost over the years. At the present growth rate India will overtake China in population by  2025. Unless we curb the population rate, no amount of agricultural produce will be enough to feed the growing number of mouths. Unfortunately, the growth rate is more among the poor, the BPL families, whose number is going up as if nobody’s concern. The Government should at least supply free condoms along with subsidised grains on a trial basis to control the population growth!

After food comes shelter. The Finance Minister has levied a 5% service tax on builders for dwellings under construction and for which the buyers are paying instalments. This tax will be eventually passed on to the buyers. Another 5% service tax is imposed on those who rent/lease out their premises. This tax also will be passed on to the tenants, raising rented houses costly.  Cement prices have been jacked up in the budget, and the cost of other building materials like steel has been going up.  In Mumbai, a two BHK flat already costs from Rs 75 lakh to Rs 1 crore, depending on the location. Now the prices will go up by another Rs 5-10 lakh for two BHK apartments.

The Finance Minister deserves kudos for making the economic situation so light. The introduction of food coupons replacing the corrupt PDS, payment of fertilizer subsidies to farmers directly are important steps the Finance Minister should pursue vigorously. Agreed, that in a growing economy, inflation cannot be ruled out. But it would have been better if he tried to bring in some economic discipline instead of asking the people to spend more. The best way to control sky-rocketing inflation is to reduce consumption. Along with the next dose of petrol price hike, the Government should work out a programme to reduce consumption, maybe by shutting down the petrol pumps once a week. Even if there is no substantial cut in consumption, at least an awareness will be created among the consumers. This applies to food as well, there is a lot of wastage and over-consumption of food. In 1965, Prime Minister Lal Bahadur Shastri had asked the people to forgo one meal every Monday. Most of the families skipped the meal and the
hotels downed their shutters on Monday evenings. There may not be much saving of food, but it will help create a discipline among the people to consume less and cut down on wastage. The Finance Minister has admitted bottlenecks in public delivery, especially in PDS, NREGA and other welfare measures. Also for the first time he described the Government as a facilitator, whose job is to help individuals and enterprises. Three cheers to Pranab Mukherjee for presenting a people-friendly budget and acknowledging that the issue is all about reform and good governance.