March 11, 2007

A historically insensitive budget: A case of missed opportunities

My immediate reaction, after hearing the Union Budget speech by our honourable Finance Minister (FM) was that this budget should not get more than 2 on a scale of 10. The reason? It was an extremely rare opportunity that a Finance Minister would have everything going in his favour while going to present his budget and yet it turns out to be a damp squib for every stakeholder of the economy. The fact is that Indian economy has been growing consistently by more than 8% for quite a few quarters now. The forex reserve stands at an all time high of around $188 billion, merchandise exports are on the verge of crossing the magic figure of $125 billion. Yet our FM found it difficult to garner all the courage to go ahead with a path breaking budget. Understandably the reasons for such sub-standard budget has nothing to do with the future of the economy but was intended towards the prospects of the United Progressive Alliance in the forthcoming elections. Amazingly, it miserably failed here too (!)

Coming afresh from the drubbing it got in the Punjab and Uttarakhand elections, the embarrassment from the leakage of the Quattrochi fiasco, and the untamable inflationary pressures, it was taken for granted that the FM would be too browbeaten to take too many initiatives. But no one expected such a hopeless budget, listening to which was more of a waste of time. But still probably many continued listening just in eager expectation that there would somewhere be some or the other kind of ray of hope, if not for the common man then at least for the industry so that its growth in turn can create employment for the progeny of the common man. But on the contrary this is one of those rarest of rare budgets which made everyone, starting from the stock market broker, the industrialist, the professionals and the middle class extremely upset. There’s nothing for anyone except those who pet dogs have allergy for Indian made food and completely depend on imported pet foods for their continued existence in a country, where it is a norm rather than an exception for the farmers to commit suicide.

In the first glance one may think that why am I so critical about the budget when it seems that the allocation for almost all the social sectors have been increased? But a closer look shows a different picture altogether. For example, the honourable Finance Minister claims to have increased the allocation on education by 34.2% to Rs 32,352 crore and for health and family welfare by 21.9% to Rs 15,291 crore. In actual terms it might sound impressive, but in reality there is no change with the previous year, if one compares the allocations as a percentage of GDP. Moreover the same allocation when compared to a population of 1.1 billion, (for the fact that on these parameters we have been ranked 126th by the UNDP)

in addition taking into account the increased inflation coupled with the fact that majority of this money would go in servicing the salaries of the teachers and the increase of seats for the quota, there isn’t anything that is left. In the same league, the much hyped National Rural Employment Guarantee Scheme which was started with much fanfare last year for 200 districts with an allocation of Rs 11,300 crore, out of which according to the Economic Survey only Rs 6714.98 crore had been released till 31 January 2007. The FM took lot of pride in announcing that the scheme has been extended to 330 districts and the allocation has been increased to Rs 12,000 crore. This means a mere increase of Rs 700 crore for 130 districts. How much does then each district gets is now anybody’s guess. And coupled with the manner in which the scheme is functioning For HIV control programmes the FM has increased the allocation to Rs 969 crore. Imagine and compare that amount to control the most lethal disease in a country with 1.1 billion population and with the second largest population of HIV patients (5.1 million). No wonder it then tells the story about how sincere the government is to arrest this epidemic. FM’s decision to grant a scholarship of Rs 6,000 per year as means-cum-merit to 1,00,000 students to check school dropouts too might seem impressive but then again compare it with around 30% of our population living below poverty line for whom sustainable improvement in living conditions is only possible through education. In such a situation one lakh is nothing more than pittance.

In case of agriculture too, the Finance Minister, except for the customary increase in the allocation for irrigation and a few other nondescript things (factor in the increase in inflation and growth of GDP), hasn’t tried to deal with the real malaise of the sheer absence of a vibrant agricultural market which makes it difficult for the farmers to find the right price for their produce. Just as it has been for most of the other sectors where competition not only improved quality but also reduced prices; unless we decontrol agriculture and bring it out of the clutches of the babus and middlemen, farmers would continue to die… a few promises here and there notwithstanding.

Similarly by increasing the dividend distribution tax the finance minister has robbed the common man of an increase income through dividend. Moreover, he has now put an education cess of 3%. But the pertinent question remains that who would make sure that this money would be spent on education and not on giving subsidised food in parliament canteens?

While writing this column, (and on second thoughts) I felt that probably I went a little overboard while giving this budget a score of 2 on 10. Ideally, it should have been 0.5 on 10. This magnanimous score of 0.5 is on account of FM’s whole hearted effort of making the economy handicapped and a half hearted initiative for physically handicapped.

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