It was no big-bang Budget that finance minister Pranab Mukherjee presented in Parliament on Monday. But nor can it be described as an outright populist one. Indeed, it reflects the sensitivity and understanding the minister brings to bear on issues affecting the farm community, big business, and even “very” senior citizens over 80. The fiscal deficit, perhaps the most worrying factor, along with inflation, is proposed to be brought down to 5.1 per cent from 5.5 per cent in 2010-11 and further to 4.6 per cent of GDP in 2011-12, that is, by `4,12,817 crores. This should boost India’s sovereign rating.
The finance minister made it clear at the beginning of his speech that he recognised the need of the hour — to improve regulatory standards and administrative practices to correct the perception that India is a corrupt nation, the need to eliminate middlemen who deprive farmers of a good price, or the need to increase warehousing and cold storage facilities to prevent over 50,000 tonnes of foodgrains from rotting due to lack of godowns. Private investment in the creation of modern storage capacity, cold chains and post-harvest storage is to be recognised as an infrastructure sub-sector. Mr Mukherjee made a significant allocation of over `2,14,000 crores for the infrastructure sector, which is vital if this crucial element of our economic life is to keep pace with growth, and in order to eliminate the bottlenecks that plague it.
The national manufacturing policy, seeking to raise the share of manufacturing in GDP — from the current 16 per cent to 25 per cent in 10 years — is a commendable initiative. So is the `500 crores given to the National Skill Development Fund to impart skills to the jobless so that industry can hire them — the aim being to create a skilled workforce of 150 million individuals by 2022. In agriculture, Mr Mukherjee made all the right noises on increasing production of pulses and cereals for the nutritional security of the poor and rural families, as well as boosting the production of edible oils — given that India has to import 50 per cent of its needs at present. The allocation has, however, not been increased in line with this. The finance minister acknowledged that implementation gaps and leaks from public programmes are a serious challenge. In the context of foodgrain, kerosene and fertiliser subsidies, he said the government was moving towards a direct cash subsidy transfer to those living below the poverty line in a phased manner. But regrettably, the minister was short on specific ideas about how to tackle corruption.
The Budget, on the whole, indicates a tilt toward rural India, even in an area like housing. The minister sprang a surprise on India Inc by increasing the minimum alternate tax to 18.5 per cent, and proposed to levy MAT on SEZ developers. This should not affect zero-tax companies too much by way of eating into their profits, but it has sparked some resentment. This is one reason why the stock market ended lukewarm after it soared over 500 points after Mr Mukherjee began his speech in Parliament. But the minister’s decision to retain excise at 10 per cent, which was part of the stimulus package, has somewhat allayed India Inc’s apprehensions. Raising excise might also have been inflationary. Mr Mukherjee has given high-bracket earners `11,500 crores in concessions and taken `11,300 crores from the people through indirect taxes. If the `12,57,729 crores that the Budget provides for spending in 2011-12 can be protected from corrupt elements, the country — and particularly the poor — should see better days in the new financial year.