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Does not meet nation’s challenges

In 2007-08, the government’s fiscal deficit was around Rs 1,27,000 crore. In one stroke, P Chidambaram more than doubled it to Rs 3,37,000 crore in 2008-09, making a mockery of the Fiscal Responsibility and Budget Management Act. Yashwant Sinha writes.

business Updated: Mar 01, 2011 02:24 IST

In 2007-08, the government’s fiscal deficit was around Rs 1,27,000 crore. In one stroke, P Chidambaram more than doubled it to Rs 3,37,000 crore in 2008-09, making a mockery of the Fiscal Responsibility and Budget Management Act.

This was done with an eye on the impending Lok Sabha polls, but was cleverly passed on as stimulus for the economy in the face of a global slump. The UPA kept perpetuating this myth. Even in his latest budget speech, the finance minister talks of a globalised world and its share of uncertainties. The fact remains India’s economy is largely insulated from the world economy and its growth is much dependent on domestic factors.

On the face of it, Pranab Mukherjee’s performance on the fiscal front is worth applauding. He has managed to cut fiscal deficit in the current year to 5.1% of the GDP and the projection for next year is 4.6%. But a closer scrutiny shows that these projections are deceptive. In absolute numbers, the fiscal deficit for 2010-11 was supposed to be Rs 3,81,408 crore, but the revised estimates put it higher at Rs 4,00,998 crore – that too with a one-time windfall of more than R1 lakh crore from 3G auction. The projected number for 2011-12 is Rs 4,12,817 crore. What Mukherjee has done is that he has suppressed the expenditure figures for subsidies, pensions and social services.

The biggest challenge was inflation. The minister has talked about it but has done very little about it. Rural infrastructure has received an additional allocation of only Rs 10,000 crore. There is very little in the budget for creating jobs.

On the taxation front, the FM has been timid. He should have raised the income tax exemption limit to at least Rs 2 lakh. He should have given greater concession to housing by raising the interest limit for I-T exemption to at least Rs 2 lakh per year.

The budget has been disappointing because it does not meet the challenges the country is faced with.