Second innings of UPA is considered to be a victory of aam aadmi. Hence, this year’s budget has been framed keeping them in mind. The budget is majorly stimulus oriented and focuses on consumption to sustain growth. For the first time, in almost a decade the private sector has not been the focus.
The government has made no substantial effort to increase private demand. Instead, the focus has been on public expenditure. The good news is the roll out of goods and services tax. Also the decision to stick with tax breaks, removal of surcharge on personal income tax and abolition of fringe benefit tax, will act as stimulants for the private sector.
The expenditure on infrastructure is in line with the Planning Commissions estimate. To replicate its previous growth, India needs to double its capacity of ports, roads, power, and airports. Budget rightly addresses the needs of all the above sectors.
Budgetary support has been increased for a large number of existing flagship programmes. A major problem is that running multiple programmes is inefficient and increases subsidy. The gray area is that UPA has not addressed the problem of implementation. Instead they have only marked out new areas for public spending.
With fiscal deficit at astronomically high 6.8% of GDP, funding is a major issue. The budget did speak about disinvestment and fuel price decontrol, but the numbers were not very encouraging. The disinvestment target of Rs.1, 120 crore per annum is miniscule when compared to the Economic Surveys annual projection of Rs.25, 000 crore.
If budgets are about vision, then this one is definitely myopic. India’s widening fiscal deficit warranted a more prudent measure from the government. Excessive government borrowing to meet the fiscal deficit might lead to crowding out of credit to private sector. Increase in debt would also reduce India’s sovereign credit rating.
No comments:
Post a Comment