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Balancing Personal And National Interests
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There is nothing in the budget which would provoke calls of a roll back. But that was the political need.
Lets now talk about the economic need.
The economy has all but stalled. A less than 7 per cent growth is hardly a consolation. And saying that India is among the best performing economies in the world does not work, as it continues to be among worst performing countries on human development index.
So there was a clear need for the budget to breathe new energy into the economic sentiment.
Tinkering with tax rates have not pleased anyone. Minor gains from income tax exemptions have been more than taken away by a hike in service tax and excise rates. There was little talk of job creation.
The interest rate regime continues to be high because inflation is still a worry. As if to make up for high domestic interest rates, the Finance Minister allowed industries like real estate, aviation and power to raise even more money from foreign loans. Its almost as though the domestic banking sector is being asked to abdicate its role for home-grown companies.
Essentially, the budget is a statement of earnings, expenditure and tax changes. Policy changes are announced on this occasion to give a direction for the coming year.
Much of the changes needed to boost the economy lie in governance and decision making. The budget couldn't have offered a resolution. But a strong statement of intent would have helped. A clear policy on use of natural resources, coal linkages for power projects, consistent export policy are examples of what is deperately needed for the economy to get going again.
Unfortunately, these issues remain unresolved.
The key concern remains its plan to raise its income. Mr Mukherjee candidly admitted that last year's assumption of growth was very ambitious. That led to an over estimation of tax revenues. The direct tax revenues for the current fiscal are woefully short of target. Disinvestment targets were not met. The expenditure has balooned. The gap in earning and expenditure will only grow the next year. The government does not forsee any fundamental shift that will boost revenue. Tax reforms like introduction of GST and Direct Tax Code and the resultant boost in revenues are unlikely to kick in any time soon. So the government has resorted to squeezing more out of provisions to tax corporate mergers and acquisitions.
The financial health of the aam admi that the UPA cares so much about is linked to the financial health of the economy. Voters and consumers are angry that their expenditure is way ahead of their earnings. It's the same for the government's finances. The political need is to raise the income of voters and reduce their costs. The economic need is to raise revenues and curb fiscal losses. Unless the government can demonstrably convince the voters of this linkage, it will face disaster on both the fronts. Consumers will vote against the government. Budget wasn't the last chance, forgettable though it was. Boosting new investment and job creation can bring back some balance in personal and national finances.
(Pranjal Sharma is a senior business writer. He can be contacted at [email protected])