Budget 2009 : an agenda for inclusive growth
Awanish K Mishra**
Surprisingly, stock Market has no cheers for the Finance Minister, Shri
Pranab Mukherjee. But it had the same attitude for Dr. Y V Reddy,
former RBI Governor, when he was turning deaf ears to the demand of
interest rate cuts. Later on Dr Reddy was lauded globally for saving
Indian Economy from global meltdown. Hopefully, market will start flying
once it comprehends Pranab Da’s Budget provisions in its entirety.
General Budget 2009 encapsulates the agenda of inclusive growth.
In my opinion, Shri Pranab Mukherjee has taken a calculative risk in formulating budget and it was a risk worth taking. He was bound to increase Government spending for augmenting demand. And he had a choice at this front – 1. providing tax concessions to Corporate sector or 2. increasing purchasing power of common man. He has zeroed in on second option.
The Finance Minister has proposed to increase Government expenditure to create infrastructure assets and boost rural prosperity. He has tried to empower rural India with economic zeal, planned to augment demand through spending on infrastructure and inclusive schemes like NREGA and Bharat Nirman. He has abolished CTT to help better price discovery of agri commodities (it will benefit farmers), removed Fringe Benefit Tax and enhanced Income Tax exemption limit for the benefit of salaried tax payers.
Including Common Man in Growth Process
It is a widely accepted fact that India has been successful in warding off global meltdown due to flourishing rural economy. Rural economy has been getting its nourishment from schemes like NREGA and Bharat Nirman Yojana. Not only the economists and critics have appreciated the impact of aforesaid schemes, but rural electorates thanked UPA by way of their mandate. Shri Mukherjee has increased NREGA outlay by 144 percent and Bharat Nirman outlay by 45 percent. If the amount of 40 thousand crore reaches out to rural India, it will culminate into huge demand for Fast Moving Consumer Goods (FMCG), steel, cement and other sectors. Shri Sunil Kant Munjal has rightly reacted that budget provisions will benefit two wheeler industry. He has said that although there is no tax concession for two wheeler industry, but implementation of NREGA and other schemes will increase buying capacity of rural masses and in turn augment demand of bikes and scooters. FMCG industry has already accepted it. It’s noteworthy that Indian FMCG industry had been witnessing upsurge in demand while other sectors were crumbling due to global recession.
Spending for Asset Creation
Critics may say that the Government has increased spending, which will result into ballooning deficit, international agencies will downgrade India etc. In my opinion, spending is not bad if it is utilized for creating assets. I concede with the fact that for the first time Government spending will cross 10 lakh crore. But major portion of this is proposed to be spent on infrastructure sector and other productive schemes. There is a hike of 23 percent on National Highway Development programme. Spending on railway has been increased by Rs.5000 crore. Allocation to Jawaharlal Nehru National Urban Renewal Mission (JNNURM) scheme is being stepped up by 87 per cent to Rs.12,887 crore. To improve the lot of the urban poor, allocation has been enhanced for housing and provision of basic amenities to urban poor to Rs.3,973 crore. This implies that Government spending is for asset creation. Spending for asset creation is not a wasteful expenditure but it results into achieving long term development goals.
Government has shown its keenness for employment generation by way of online registration of the unemployed. No political party would ever desire to make its failure public. Creating a web based employment exchange and throwing it open to public may create a disaster for Government if number of unemployed keeps on increasing. This reinforces the fact Government means to convert its words ‘creation of 1.25 crore jobs per year’ into action.
Rewarding honest taxpayers
About the tax provisions. Shri Pranab Mukherjee has said that new Tax Code will be thrown open for public comments in a time frame. New Tax Code is a way to make tax laws simpler, easier to understand and more transparent. This is a way to tax empowerment. It will result into better tax collection. Intention of the Government is clear : trust taxpayers and taxpayers will fill coffers. Introduction of a simplified income tax return form Saral-2 is a way forward in this direction. The Government has thanked taxpayers by increasing tax exemption limit by ten to fifteen thousand, removing surcharge and abolishing FBT.
Bringing farmers to the forefront
Welfare of farmers is at the core of Budget 2009. Government has set a target of 4 percent agriculture growth and to achieve this, it has set a agricultural credit target of 3.25 lakh crore. In addition to this, allocation under Rashtriya Krishi Vikas Yojana has been increased by 30 percent and under Accelerated Irrigation Benefit Programme by 75 percent. If UID scheme is implemented in stipulated time frame and 3.25 lakh crore is pumped into agriculture sector in its entirety, Indian economy will have robust footing. Shri Mukherjee has promised to avail agri loan at the rate of 6-7 percent. He has proposed to provide health insurance cover to all BPL families under Rashtriya Swasthya Bima Yojana (RSBY). His Endeavour to change structure of fertilizer subsidy is intended to benefit common farmers. The Government has proposed to enroll 50 percent of rural women, in the country, as members of Self Help Groups (SHG). This will provide financial empowerment to rural women and result into their betterment. Government has abolished Commodity Transaction Tax. It will benefit farmers and traders both. Farmers will be able to sell their produce at competitive price as enhanced trade on commodity exchanges will lead to better price discovery.
Budget 2009 has provisions to strengthen Indian economy amidst global turmoil. Shri Pranab Mukherjee has strived to carry aam manush in the wagon of development.
•Editor, Money Mantra, Pearl News Network
Disclaimer: The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of INVC