Union Budget Would Worsen Indian Economy

Laimayum Bashanta *

Three major challenges have been mentioned in the Union Budget speech of UPA Government. The first challenge before us is to quickly revert to the high GDP growth path of nine percent. Then we go on to achieve the double digit growth. The second one is to make development more inclusive and third one is to remove bottlenecks in our public delivery mechanism. The Government has not mentioned the challenge of price rise among the three challenges mentioned in the Budget speech.

Economic survey mentions that inflationary expectations rose due to excessive hype and due to building up of inflationary expectations people started to resort to hoarding. We would like to ask who is responsible for it? The UPA Govt. is directly responsible for it. There is no denying the fact that green shoots are visible in economy but it is not right to start celebrating over it and making claims that we have overcome all the crises and that we are heading towards achieving double digit growth. We feel that it will be premature to celebrate.

All the economists agree that to achieve growth rate of 7.2 percent, we have to clock a growth rate of nine percent in last quarter i.e. January-March quarter. You cannot feed people only by growth figures. Governments started to indulged in jugglery of figures to make tall claims about the growth but it is not going to satisfy our poor masses in the villages.

The challenges of price rise and agrarian crisis have not been given the desired importance in the Budget. A big question mark hangs over as to how far the target of growth and inflation would be met for the next fiscal. The Finance Minister has sidelined the issue of bringing down the revenue deficit to four percent as has been suggested by the 13th. Finance Commission which is currently on higher side.

It is heard to believe on the Budget estimates and figures and it will be very difficult to achieve the target of bringing down the fiscal deficit because expenditure growth has been shown to be on lower side and growth in revenue receipts has been estimated to be more than 18.5 percent which has only been surpassed in two years of more than nine percent growth during last ten years.

The Government should make its stand clear on the issue of allowing 49 percent FDI in insurance sector. It is very necessary to give statutory banking status to Pension Fund Regulatory and Development Authority. The Pension Fund Authority has been functioning without any law and banking and the pension contributions of Government officers and staff from 1st. January 2004 managed by the Authority has been taking place on non-statutory basis.

We would like the Government to make its stand clear on the issue as on date. There is also a need to clarify as to what would be the role of Financial Stability and Development Council. A lot of efforts will have to be made for implementing GST and Direct Taxes Code regime from 1st. April 2011 and if not enough diligence is shown to achieve the above it can be difficult to meet the said deadline. While on one hand we are concerned about the adverse effect of rising inflation on common man, Government is indulged in blaming other for it and is shirking away from accepting its responsibility in this regard.

FM have shown Rs. 26000 crore less in Direct Taxes, FM have made a sacrifice, but the point is for whom, those who earns Rs.3 to 8 lakh per year. Three Lakh Rupees per year income means 25 to 75,000 per month.FM given the exemption to this class of citizens and their savings would be up to Rs.50,000 per year.FM had stated that this Budget belongs to "aam aadami".

What is the definition of aam aadami? According to UPA, those who earn more than Rs.25,000 per month are aam aadami and hence those who earn more than Rs.25,000 per month should be given exemption and those who earn Rs.25 per day should be looted. FM have taken three major steps in UPA's Budget which would further aggravate the price rise. It was being hotly debated as to whether to stimulus package would be withdrawn. Under the stimulus package they had reduced the Central Excise Duty has been reduced and now everyone was expecting that it would be increased now. It was increased by two percent. We would like to ask the Finance Minister as to whether the prices had come down when he had reduced the Central Excise Duty. The prices did not come down.

This Government had reduced the import duty on the crude by five per cent, still the prices did not come down. But when increased the import duty by five percent with one Rupee increase in the price of diesel and petrol, then it put the market on fire. Thereafter, this Government brought the real sector under the Service Tax net. If some individual is purchasing a flat under the instalment scheme then he has to pay 10.33 per cent Service Tax which would add to the over all price of the real sector.

The prices of cement have gone up by Rs.12 per bag so have the prices of steel registered a hike. As far as the fertilizers are concerned, they have stated that they would be increased w.e.f.1st.April. But their own Minister has stated that the opposes any increase in prices of fertilizers. They have constituted a Green Fund on Coal. But FM have imposed a duty on Coal which would fetch Rs.3000 crore. Railways has also been brought under the Service Tax net which would further flare up the prices of all commodities.

We would request the FM that Forward Trading of wheat in the commodity Exchanges would be stopped. They increased the Expenditure without any limit. Meanwhile there was global financial crisis and they tried to cover all their excesses under the grab of global financial crisis. It virtually became their shield for everything. Now, when elections are over, our Prime Minister is talking to fiscal discipline. They think that they have won the elections, and now put the entire burden on the people who elected them.

One year before the elections, the Government again resort to populist schemes. The growth rate for which Government are trying to get credit, is all consumption led growth. The electrification have happened on papers only. They also stated that the prices increased because their Government provided higher Minimum Support Price to the farmers. When they came into power in the year 2004-05, the MSP of wheat was Rs.640 per quintal. They increased it to Rs.650 per quintal with an increase of Rs.10 per quintal only.

However, in the year 2007-8, this jumped to Rs.1000 per quintal because this was an election year. Again in the year 2008-09, it was increased by Rs.80 per quintal and in the year 2009-2010, by Rs.20 per quintal only. This trend pervades across all the crops. When the elections were over, the MSP's were compressed. Thus, their motive was served.

As far as infrastructure is concerned, FM have claimed to have provided Rs.1,73,552 crore which accounts for 46 percent of the Budget- total plan allocation. But when we look at the Budget, we find that in roads, it is an increase of Rs.2400 crore, in Railways it is an increase of only Rs.8950 crore. In last year's Budget, the FM had stated that the India Infrastructure Company Limited would support the schemes worth one lakh crore Rupees. But this year, disbursements are expected to touch Rs.900 crore only by the end of March. That figure of rupees one lakh crore has been reduced to only Rs.9000 crore.

Take out financing has not yet been implemented. Across all major sectors, FM has increased the allocation by Rs.100 crore or Rs.200 crore or Rs.300 crore symbolically. This will not result in sustainable progress. We are expecting that FM would increase the Income Tax exemption for the housing. NDA had increased this Rs.15,000 per annum to Rs.1,50,000 per annum. Now, for eight years or so that figure of Rs.1,50,000 remains static despite rising inflation and all that which needed to be increased.

Another point and last one, we would like to raise here relates to our domestic saving rates. It was a matter of great pride that our domestic saving rates have fallen drastically by 3.90 basis points in one year which is representative of the deficit in the Government. The tradition of savings in this country makes it run. This country does not run on the basis of FDI. So, we would only like to state that the claims of the Hon'ble Finance Minister do not appear to be true.

On one side he has hit the aam aadami very hard ,on the other he has done everything possible to make the rich richer. Therefore, all your expectations and estimates are bound to fail you. With all humility, we would like to say that this Budget would worsen the economy and the estimated figures would also fall flat. Therefore, vehemently opposing this Budget.