A government that returns to power in the name of the aam aadmi cannot suddenly become their enemy. This is exactly what the UPA government has done through this budget.
It spent recklessly in the last two years to improve electoral prospects. It was like injecting sweet poison in the body economic, which the economist-prime minister knew would be fatal. Political compulsions forced him to go along. The global financial crisis came in handy to disguise this election-oriented expenditure as a stimulus package for the economy. Exiting from that situation was bound to be painful for the government and the people.
Companies are celebrating reduction in corporate tax surcharge; economists are hailing the cut in fiscal deficit; the market is cheering thr roadmap on goods and services tax and the direct tax code; business groupings are as usual toeing the government line, but it is the aam aadmi who has nothing to celebrate.
The increase in excise duty by 2 percentage points and the increase in petrol and diesel prices is a double blow to the common man already battling a 20-per cent food price inflation. He was looking for relief, he has got the stick. The finance minister’s claim that the “budget belongs to the aam aadmi” is like rubbing salt on his wound.
A revenue mobilisation through a hike in excise, customs and service tax of Rs 50,000 crore in one year is unprecedented. Since we still have the system of tax over tax, that along with the diesel price hike will have a huge cascading effect and the burden of this tax mobilisation on the aam aadmi is going to be many times more than Rs 50,000 crore.
As for price rise, this will be like fat to fire. It is bound to have a dampening effect on domestic demand, which has been the driving force of the economy. The secret of India’s growth story has been the availability of cheaper money and a huge domestic market. Inflation, to which this budget will add, threatens both.
I have for long felt that instead of spreading its limited resources too thinly, the government should concentrate on a few priority areas like agriculture, rural development, health, education and infrastructure. In each of these, there should be a 100 per cent centrally-funded scheme. If only 16 paise is reaching the people out of the 100 that the government spends, imagine the revolution it will bring about if all 100 is delivered.
Improving the delivery system, the minister said, is a top priority, but he’s done nothing in this respect. He doesn’t even indicate a roadmap for governance reforms.
Every finance minister fudges figures in the budget. I was a little surprised, therefore, to see that at various places this fudging has gone beyond acceptable limits. For example, the gross tax revenue is slated to increase next year by Rs 1,14,000 crore. Given that the increase was only Rs 33,000 crore this year, there is nothing to suggest the projection is in the realms of possibility.
The Budget was eagerly awaited, it has been hugely disappointing.
The writer is a former finance minister