Budget Take

Last week the country witnessed the most important event when the Union Budget was announced by Mr. Pranab Mukherjee in the Parliament. The budget is important not only because it will affect over a billion people for a year, but also because of the role the country will play in driving the next phase of global growth.
The occasion for the budget is unique this time. The world seems to be baby-stepping out from one of the worst recessions of human history and for India, whether to wean the stimulus at this nascent stage or wait for some more time is what weighed heavily in the pre-budget discussions.

I believe Pranab babu has done a real good job this time much because of a budget which is not flashy and flamboyant but practical and of vision. He has decided to partially wean the stimulus which seems to be correct given the situation. One thing which seemed to be pleasing is his acceptance of certain truths, like the budget is essentially a document which follows the political agenda of the party. Pranab babu did not reek of hypocrisy which seemed so fresh from a politician.

Rolling back of stimulus packages is a political hot potato! It is never easy to announce lesser public expenditure, lesser sops, higher indirect taxes leading to higher commodity prices; but the government has to do it at some point of time. Opposition from the left of the house is understandable. The fact that this is only the second year of UPA-II has helped the cause. Its atleast two years before some economically unviable measure, like farm loan waver, will again be announced. So Pranab babu has very shrewdly announced some rollbacks this year to create space for some fiscal imprudence in the coming years as hogwash before the next lok sabha elections.

The issue of inflation is another political imbroglio. The issue is so powerful that the opposition chose to walk out of the budget session as soon as the rise in excise on petrol and diesel was announced. The motive, probably, is to reduce the fiscal deficit from the increased Rs 26000 crore realisation on account of the rise in excise in petrol and diesel. I believe such an announcement could have been avoided in the budget. One can always announce a price hike at any other time of the year. May be, Pranab babu was too inclined on reducing the fiscal deficit, which, indeed is a very positive sign. After all with a high deficit, the borrowings will be more which in turn will move the interest rates northwards and thus the cost of inputs will shoot up leading to rise in inflation. But in such a case, the food prices may not rise that much and it is food prices that the majority of the population in India is really worried about. So what I feel is that the petrol and diesel hikes could have been done away with while food inflation is so high! This could have saved them the political mess they are into now with even the allies protesting against it.

Pros and cons will always be there, but all-in-all this budget seems to be a good one. There is nothing big to discuss or brag about, but it gives a sense of control, calm, prudence and vision.