Union Budget 2013 is certainly a restrained, hold on operation lacking the expected flamboyance that Finance Minister P Chidambaram has been typically associated with, but, at the same time, there are some positive directions in the proposal that have the potential of taking the Indian economy into a higher growth path. Of course, the FM had to walk a tightrope balancing fiscal prudence without affecting the Congress’ core constituencies, and it is obvious that he has managed, even with a budget estimate as subdued as the current one, to achieve that. Chidambaram described his own proposal as adhering to the ‘three P policy’, that is trying to maintain a balance between prudence, pragmatism and progressiveness, and, to some extent that does hold true. The FM has resolutely stuck to his professed target of reducing the fiscal deficit and he has managed the math to bring it down to 5.2 per cent of the GDP in the current year, while aiming for reducing it further to 4.8 per cent for the next fiscal year. In addition, public expenditure has been raised by 16 per cent, with Plan expenditure given a substantial boost, and defence allocations, too, increased considerably. Chidambaram has attempted a please-all, multi-pronged approach with an eye on rebooting the sagging circuits infrastructure, and by accepting the GAAR suggestions, he has also not displeased the markets completely, despite levying the tokenised surcharge on the super-rich. While PC has made it amply clear that foreign and domestic investment remains the top priority at this juncture to plug the gaping holes in the economy, there’s not enough meat in the package either to suitably re-energise the drooping spirits of the corporate sector.
Nevertheless, despite the FM’s underscoring of an inclusive growth, what has not been indicated at all is the mechanism to undertake such a promise-heavy proposal, particularly in the context of rising prices of essential commodities and food items. Tackling inflation remains a key challenge and Chidambaram has not mentioned how exactly he intends to bring it under control. Furthermore, schemes such as Direct Cash Transfer, which have an immense potential, have reached only 11 lakh people so far, and FM has not specified how to widen its reach in order to bring in as many people as possible within its ambit. While prices of luxury goods such as SUVs, smartphones, cigarettes have been rightly increased, would these be enough to generate the extra revenue that would be needed to meet the raised expenditure limits? Although the measures such as starting the women’s bank, focus on youth employment, health and education sectors, and even the hike in resources for the proposed Food security bill, or the MGNREGA scheme, as well as proposal to turn post offices into banking centres specifically aimed at rural development, look poised to enthuse the young and old in villages and metropolises, there are several grey areas that appear mired in rhetorical opacity. For example, while huge funds have been allocated to West Bengal, Bihar, Odisha in accordance with the Centre’s ‘look East’ approach, so as to please these grumbling states that have been hitherto critical of the UPA-II’s handling of these cash-strapped regions, the budget also allows for covert initiatives, such as permission to sell surplus coal that major mining companies have anyway received from Coal India at subsidised prices. This could effectively become the starting point of a bigger-scale disinvestment and eventual privatisation of a key sector. However, strengthening of the Securities and Exchange Board of India (SEBI) is a welcome development, and adjustments such as increasing the Securities Transaction Tax and initiating the Commodities Transaction Tax, as well as the new requirement for revenue sharing in corporate sector bode well to bring in parity in these conflictual financial areas.
In sum, it remains to be seen whether PC’s bitter medicine provides the necessary cure for the ailing economy, or just turns out to be an eyewash meant to tide over the crucial pre-election year in order to hold on the key states and core constituencies of the Congress party.