The finance minister presented this budget against the backdrop of high GDP growth. The growth so far has been broad-based across all sectors, even as economies in the West are still experiencing tepid growth and high unemployment. The outlook for India however shows accelerating momentum for the next year too.
The Economic Survey expects both savings and investment ratios to continue to improve. Hence the 2011-2012 budget of the finance minister seems to be aimed at consolidating gains made by the economy. It is mostly pro-growth and contains enough impulses to propel both consumption and investments. The decision to keep general excise duty at 10% and not roll it back to 12% is to be seen as anti-inflationary and growth promoting. The increase in personal tax exemption limit will also add some purchasing power of the taxpayer.
But high food inflation continues to haunt everybody, even though food inflation has dropped by half since a year ago. The Budget does make an attempt to reduce the food inflation for the common man. The finance minister expressed concerns about the huge price difference between wholesale and retail prices of food items. So any effort to decrease the inefficiencies in the agricultural supply chain will go a long way in controlling food inflation. To this end there are many initiatives to attract investments that can improve efficiencies. The various incentives announced and reiterated in the agricultural supply chain such as storage and cold chain are to be welcomed. The budget is specifically focused on infrastructure and agriculture. The classification of fertiliser as an infrastructure sub-sector and the reform in fertiliser pricing policy will go a long way incentivizing investment into fertiliser and spreading the Green Revolution towards eastern parts of India. The creation of an infrastructure bond fund will provide long term funds much needed in that sector.
On employment and skill creation too the Budget has provided crucial support. Not only can India’s share of industry grow from 17 to 25% of GDP (gross domestic product), but India can also become one of the manufacturing hubs for the
world. This requires huge increase in skills development, a goal which the FM reiterated. One manufacturing job can have a big multiplier effect on overall employment. In the past two decades the growth in organised sector employment has not been commensurate with the high growth in GDP and this anomaly needs to be addressed.
Financial sector reforms are a high priority, and are integral to making India globally competitive, as it engages more with the world. It must be commended that despite several constraints in raising revenue and substantial hike in infrastructure, education and agriculture, the projections for fiscal deficit look attractive and credible. The budget signals consolidation of gains and continuity of policy, to keep the economy on a high and inclusive growth path.