The last few Budgets have had the recurring theme of inclusive growth, strengthening the social and physical infrastructure, and preparing the country for a set of institutional reforms. Finance minister Pranab Mukherjee’s Budget 2011 continues the tenor, which, by itself, is reassuring.
The finance minister has taken further measures to improve the quality of government spending. There has been a relatively faster increase envisaged in plan expenditure, and focus on areas like education, health and rural infrastructure has been strengthened. Alongside this, Mr Mukherjee has signalled a transition towards direct cash transfers so as to target subsidies more effectively. If this move succeeds, on the back of the UID initiative, it will go a long way towards creating an effective, yet sustainable, social security net.
Even while increasing the outlays for key areas, the finance minister has managed to peg the increase in overall government expenditure at a relatively moderate level. Apparently, India is well on the path of fiscal consolidation. The finance minister has recognised the imperative for a counter-cyclical fiscal policy. This will enable India manage the macroeconomics stability in a prudent manner even as the global economic environment turns more volatile and uncertain.
Notwithstanding some expectations of an increase in the general excise rate, the Mr Mukherjee has refrained from such a step. The Budget has, thus, avoided adding to inflationary pressures. For the corporates, the reduction in surcharge is welcome. The finance minister has also tried to reduce the tax burden on individuals marginally. He has provided a welcome relief to senior citizens.
Though the Budget may not have made many big-bang announcements, it scores through specifically directed initiatives. It has incentivised investment in the fertiliser sector and in cold storage infrastructure. It has endeavoured to attract foreign investment in infrastructure debt funds and in schemes of mutual funds. These will have a salutatory positive, long-term impact. Housing sops are encouraging for middle-class home buyers as well as for the economy through sheer multiplier effect.
The disinvestment process continues with an achievable target for the next year. The intention to formulate a new manufacturing policy driven by considerations of self-regulation and global competitiveness deserves applause. India has great potential to become a global manufacturing hub. As the finance minister elucidated at the very start, this Budget has its thrust on a more transparent and result-oriented economic management in India. In turn, such an approach could help in strengthening the micro-foundations of a great macroeconomics growth story that is evolving in India.