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Economic slowdown to impact budget 2012

business Updated: Jan 04, 2012 20:46 IST
Chetan Chauhan

The global economic slowdown would show its impact on the Union budget 2012 with the increase in funds for development projects not expected to be more than 10%, less than the average inflation in the last one year.

To salvage the situation, the government may announce a slew of new schemes to be launched in the 12th five year plan including Rashtriya Uach Siksha Abhiyan, a Rs 5,000 crore scheme to support entrepreneurs in the telecom sector and money for implementing the National Food Security law.

The Planning Commission, which allocates development funds for different ministries, has proposed three scenarios: hiking allocation by 5%, 10% and 15% to the finance ministry.

The panel officials, however, expect the finance ministry to give approval for hike of 10 % which would be lowest increase in plan funds in the last four years. The normal increase during recent years had ranged from 12-15%. In budget 2011-12, the plan allocation was Rs 4,41,546 crore, an increase of about 15% from previous year.

Not much increase in plan funds also falls in line with the call of Prime Minister Manmohan Singh on new year's eve for fiscal consolidation.

"I am concerned about fiscal stability in future because our fiscal deficit has worsened in the past three years," the PM had said and added that India once again should being the process of fiscal consolidation.

The government is unlikely to substantially increase funding for existing schemes except in case of health and education. Some of the existing schemes, which have outlived their life, may be scrapped.

The next budget is expected to create some brouhaha for the government as it would launch the 12th five year plan. Finance minister Pranab Mukherjee is expected to a slew of new schemes that would be made operational during the plan period.

As the PM wants more impetus for the agriculture sector, the budget could see a new loan scheme for landless farmers in rural India, which are about 10% of the total rural population, to purchase land. There would be additional funds for increasing agriculture output in eastern India.

The officials say the budget would witness new initiatives in the health sector including making cheaper medicines available through Public Health Facilities and increasing the ambit of the existing insurance schemes.