Pranab Mukherjee's General Budget

There are many a thing in the general budget presented by Finance Minister Pranab Mukherjee on 26 February, as were expected by economists. At the same time, there are other areas where despite having taken harsh decisions, softness has been employed in the budget proposals.
There was a general opinion that the government may withdraw stimulus packages. Even the Economic Survey, 2009-10 had hinted at the same. Yet, avoiding withdrawal of the package immediately, there is a proposal to withdraw these packages gradually and slowly. This made the industrialist community heave a sigh of relief.

The economic survey portrays the growth rate for this fiscal year at 8.7 percent. Yet the finance minister, going far ahead of it, has thrown many encouraging hints maintaining that the achievement of 10 percent growth rate is not much beyond our reach. Even during the new fiscal year, the growth rate is expected to be at 9 percent. The budget proposes to enhance allocations for the National Rural Employment Guarantee Act (NREGA) and Rajiv Awas Yojana, heavily. Continuance of one percent subsidy on the rate of interest for the home loans for yet another year carries good news for both homebuyers and the builders. It would certainly help the reality sector to come out of the grip of recession.

Education Sector
By allotting Rs.310.36 billion for school education, the government has taken a step toward reform in primary and secondary education providing free education. Yet, there is no hint whatever at reining in the institutions of higher learnings and private technical and training institutions which charge exorbitant fees. Reining in these institutions to bring down their fee structure is extremely necessary to enable the common man to aspire for high education.
By increasing the allocation by 75 percent for urban development it has been pegged Rs.54 billion. Though, a mention has been made to improve infrastructure in urban and rural sectors and a huge amount of Rs.1.735 trillion has been earmarked yet, the government appears to be inclined more toward urban development. The government has stressed the need of paying attention to public expenditure and providing resources yet, there is no mention whatsoever of any concrete measure for the same.

Step Toward Privatization
The announcement of earning Rs.250 billion through disinvestments, is yet another step toward privatization. Yet, one wonders how the government would deal with issues like employment of those working in this sector and other issues. Empirically speaking, earlier experience of the government in this regard has not been much successful. Yet the decision to provide services to the economically weaker sections of the society is an appropriate one.
It is only for conjecture how far would the initiatives taken toward power and energy sector be successful and effective, because despite best efforts of the government in this sector, there has been no worthwhile improvement and the progress has been rather slow. The finance minister also made a mention of initiation of measures to check inflation and price rise. Yet, until concrete results of such announcement are visible, it is difficult to appreciate them.

Revamping of Income Tax Slabs
The most significant and entirely unexpected decision in the budget is the revamping of income tax slabs, which aims at providing relief to the middle class. Under the new slab, structure, those earning up to Rs.500,000 a year would pay income tax at the rate of 10 percent, earlier it was 20 percent. The decision would provide relief to 60 percent of taxpayers. However, the common man has been further burdened by the increases in the prices of diesel and petrol.

It would have its impact on public transport and freight section. This would nullify the measures the government's efforts in chocking price rise and may further escalate prices of essential commodities and consumer goods. It was however, already expected by the people. On the whole, the budget proposals, if not laudable, contain some good decisions, which were not being expected of the government.

Highlights of Budget

* Taxes on big cars and SUVs increased 2 percent to 22 percent
* Basic duty of 5percent on crude oil restored
* Tax on cigarettes, cigars and chewing tobacco up
* Rs 26,000 crore revenue loss due to cut in direct taxes
* Partial roll back of reduction in central excise duty
* IT returns forms for individual tax payers to be further simplified
* Expenditure in 2010-11 estimated at 11,l8,749 crore
* Fiscal deficit estimated at 5.5 percent in 2010-11; 1 percent improvement over 2009-10
* 46 percent of plan allocations in 2010-11 will be for infra
* Implementation of direct tax code from April 2011
* FDI flows in April-Dec 2009 $20.9 billion
* National Social Security Fund created for workers in unorganized sector
* National Clean Energy Fund to be established
* Exclusive skill development program for textile sector
* Banking facilities to be provided to all habitations with a population of 2,000 and more
* New fertilizer policy from April 2010
* Toy balloons, water filters, refrigerators, mobile equipment, set top boxes, CDs cheaper

Fiscal Discipline, End of Corruption To Make India World Leader

In the annual economic survey presented in the Parliament on 25 February giving an indication of new spurt in economy, it has been said that in the next four years, India would become the fastest-growing economy of the world. At the moment, it is the second fastest-growing economy of the world, after China.

Growth Rate
Analysts believe that in the coming years, India would leave behind China in this matter. This is also being confirmed by development-related figures of the economy. Despite recession, the country's economy registered a growth of 6.7-percent during 2008-09. During 2009-10, the growth rate is expected to be around 7 to 7.5-percent, and during 2010-11, it is estimated to be around 8 to 8.5-percent.
The government would have to strengthen its fiscal condition so that the county's economy could become the fastest-growing economy of the world, and would have to give proper direction to government spending. Apart from this, it would also have to review the big dose of concessions given to industries to deal with global recession, and to provide momentum to the economy.
Most industries have not only as come out of recession now, they are also growing with considerable speed. Such industries do not need any kind of stimulus now, but those industries that have not yet fully recovered from recession do need it partially. After some time, when their condition improves, these incentives could also be withdrawn. Some incentive certainly needs to be given to those industries where the pace of investment is still slow.

Improve Infrastructure Facilities
To become the fastest-growing economy of the world, it is also very necessary to improve infrastructure facilities in urban and rural areas, and to end corruption at administrative level. We cannot imagine development without infrastructure facilities i.e. electricity, roads, and rail. There is no doubt at all that if the country could be freed from rampant corruption prevailing at the government level, we would not only become the biggest economic power of the world, but could also become a global superpower in other fields as well. Some of our people have amassed illegal wealth in the Swiss banks in huge quantities.
With that, we could not only repay all our foreign debt, but would also be in a position to lend money to others. If that happens, we would be able to easily deal with the curse of price rise and poverty.