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Mr FM, show us the money

Barely two weeks before the Budget for 2011-12, finance minister Pranab Mukherjee and the government’s macro-economic managers have their plates full. HT talks. Citizen Charter

delhi Updated: Feb 15, 2011 01:30 IST

Barely two weeks before the Budget for 2011-12, finance minister Pranab Mukherjee and the government’s macro-economic managers have their plates full. India’s economy is saddled with major problems – just when it looked like a challenger to China to be the world’s fastest-growing economy.

Food prices have remained stubbornly high, pummelled by a supply crunch in staple vegetables. Weather problems in Australia, Argentina and Russia have hit global food and commodity prices, while oil prices have crossed $100 a barrel and these have pushed up prices of other goods.

Factory output growth plunged to a 20-month low at 1.6% in December, policy uncertainties loom ahead of the Budget, and corruption scandals are hitting political sentiment that can, in turn, hurt the business climate.

As a Hindustan Time-CFore survey showed, people want Mukherjee to announce measures that would bring down prices immediately. The common man also wants Mukherjee to reduce tax rates or change the tax slabs in a manner that it would leave more money in their hands. Citizen Charter

Consider this: Nearly everybody the survey covered (95%) wants the finance minister to restructure the tax slabs.

More than six out of ten people are of the view that prices will be the overriding concern in this year’s Budget, followed by growth in the broader economy. India’s GDP is set to grow by 8.6% in 2010-11, but a possible industrial deceleration has become a cause for major worry.

“Index of industrial production numbers are very unfortunate and it is disappointing but it was on expected lines as it was on a yearly basis,” Mukherjee said on Friday after the release of the December factory output data.

“Monthly and weekly numbers do not reflect the correct picture. Therefore you shall have to take the whole year into account. Let us see how it reflects in the annual picture,” the finance minister added.

Manufacturing output, which accounts for about 80% of industrial production (mining and power the remaining 20%), grew by 1% in December.

Capital goods output contracted 13.7% in December in a sign that the higher cost of credit and rising input cost may have forced companies to defer planned investments.

The RBI has raised key policy rates seven times so far this fiscal to cool prices.

“The Budget, we hope, will try to address the issues related to slowdown in manufacturing,” said Rajan Bharti Mittal, president of the Federation of Indian Chambers of Commerce and Industry (Ficci).

The government of India has been rocked by five major scams last year. It is under attack for inaction over black money allegedly stashed away in overseas tax havens.

More than six out of ten people surveyed want the government to come out with an amnesty scheme to tax offenders who pay up. The last such immunity scheme — Voluntary Disclosure of Income Scheme — was introduced in the 1997-98 Budget.

The government has constituted a multi-disciplinary committee involving think-tanks — National Institute of Public Finance and Policy (NIPFP), National Institute of Financial Management (NIFM) and the National Council for Applied Economic Research (NCAER) — to estimate the amount of illicit funds generated.

Will the finance minister oblige? Wait till February 28 to find out.