B DAY BLUES

Budget Day has come and gone. The hype and hoopla associated with the
budget has turned the event into a veritable television frenzy. The
immediate takeaway is that prices will rise – all services, barring 17
items, which form 59 per cent of the GDP will be taxed at higher rate
of 12 per cent while excise duty has been ramped up to 12 per cent
from 10. The next big scare comes from the rising fiscal deficit which
obviously has a life force of its own because it has galloped to 5.9
per cent of the GDP. Throw in the debt on the books of the states and
this consolidate figure is in excess of 10 per cent. Tinkering in the
income tax slabs may have thrown some crumbs for the salaried class,
but the general rule of thumb in this budget is that prices will rise.

In many ways a zero risk, middling, pedestrian and lackluster budget
driven by an overhang of a dramatic revenue shortfall. It makes the
right noises about important items on the nation’s agenda, but does
not detail the prognosis for the affliction. The journey over the last
seven years has seen the Congress hemmed in by its coalition partners
– first the Left and the DMK and now increasingly the Trinamool
Congress. One step forwards and three step backwards as pressure
points have been built up incisively by the allies reducing the
Congress’s room to manoeuvre.
Fiscal profligacy over the past few years has even seen full stop vis
a vis populist flagship schemes. Safe rather than sorry seems to be
the mantra. Once again finance minister Pranab Mukherjee has wasted an
opportunity to take India to the next level of the growth paradigm.
While he said the right things, the words may not necessarily mean
very much. "Economic policy, as medical treatment, often requires us
to do something which in the short run may be painful but is good for
us in the long run," he said and rounded it off by saying, “As
Hamlet, the Prince of Denmark, said in Shakespeare's immortal words,
'I must be cruel only to be kind'."
Yes, I want to do so much, but I cannot. Which is a travesty because
it means that India is satisfied with a 6.5 per cent growth when by
widening and deepening reform, it can actually vault back to the 9
plus per cent trajectory. Potent, unpalatable reformist measures
simply cannot be taken by this government, the yawning fiscal gap all
pervasive. Mercifully, the finance minister has for the first time
dealt with one of the biggest eyesores – generation and use of
unaccounted money. What is welcome is the introduction of compulsory
reporting requirement for assets held abroad and allowing for
reopening of assessment upto 16 years in relations to these same
assets.
The FM reckons that 7.6 per cent is an achievable growth target for
next year, which appears optimistic, given the inflationary pressures
that swim around in the economy. A spike in crude oil prices has
swelled India's subsidy burden to roughly 2.5 percent of GDP. The year
2014 is already looming large on the political horizon, this budget
shows that it may well have popped up on the radar a year early.
Distraught over the recent debacle at the hustings, drubbed repeatedly
by TMC’s Mamta Banerjee, it appears to be a government in a limbo. In
many ways a mirror image of the tokenism that an embattled government
is dishing out in terms of governance. The budget being a microcosm of
a larger paralysis. No growth imperatives and definitely no blueprint
to control the rising fisc.

-MAIL TODAY,17TH MARCH,2012