A look at the budget this year reveals pitiable state of affairs. One third of the revenues comes from borrowings. When Mr. Mukherjee became FM we expected him to have left behind the socialist baggage of the 80's. He seems to be the same old man passing strictures on tax issues in retrospective effect, raising import duties on gold and diamonds(thus causing the flourishing jewellery exports to be dented) etc. The markets and investors have reacted negatively to GAAR and i feel instead of postponing it for next year it should be completely done away with. What use is all that if you are not going to reopen old cases. While expanding tax slabs is welcome, the stick that comes with the carrot, i.e the withdrawal of stimulus and raising of excise and service tax rates would be a bigger burden. The 20k that could have ben invested in infrastructure bonds was expected to be raised to 30 or 50k but the benefit has been completely taken away. A new rajiv gandhi equity scheme which is meant to encourage small investors to invest in stocks is good but not that productive i believe.
In all likeliehood this year the diesel prices are going to be deregulated and hence raised. Petrol prices have been raised. This would fuel inflation. While crude prices are not under control of our govt. exchange rates have worsened undoubtedly due to policy paralysis. The economic survey admits that since agricultural growth has not been up to the mark and industry is growing at a slow pace all the growth is expected from services.
The expenditure target of 13 lakh crores last year has been breached and we ended up spending 14 lakh crores. This budget has been the least imaginative of all and does not even mention about GST or DTC. Pranab da neglected the SEZs and said that MAT will be applicable to them as part of DTC. SEZs were replaced by NMZs. This is policy flipflop and sends a wrong message to the investors. It looks like the minister is pleading for time and hoping that things will be set right on their own. Now from here there can be two ways we could go. A growth path of 7.6% as predicted for next year and higher the next year with inflation under control or a growth of 6% or lesser and uncontrolled inflation. The second path looks to be more probable among the two and the economy might languish at about 6% growth for many years to come.
The telecom mess caused by the supreme court verdict of license cancellations has spooked the investors. We are now viewed as unworthy of being in the BRICS. S&P has downgraded us from stable to junk. I feel pranab da should vacate his FM post for lack of performance and a suitable replacement found. May be he would do better in the rashtrapathi bhavan. It would be good for him. 77 yrs is a good age to say good bye to politics. Is sonia ji listening???
