BUDGET 2013

The recently presented Budget 2013 does not do anything to help the nation overcome the deep sense of pessimism and despondency that has overwhelmed it for some time. The Heritage Foundation, an US based Think Tank, castigating the Indian Budget 2013 says, The true wealth of Indian households has stagnated in the past four years as income growth has slowed and consumer inflation remains high. When UPA II took over in 1999, Indian economy was growing at a healthy pace, the world was looking towards India as a major engine of growth that would help the world overcome its economic troubles and Indians were anticipating the future eagerly. Instead, since then, under UPA II inflation has doubled and Indian economys growth rate has reduced to the extent that the ghost of the long forgotten Hindu rate of growth (34 %) has started haunting some, while worsening the central governments current account deficit (CAD) consistently. In contrast, Greece, considered a basket case by some, shows an improvement in its current account deficit. Unless we save, invest, produce and consume more we are condemned to be perpetually a developing country. Budget 2013 does not create conditions for Indians to save, invest, produce and consume more. Given the dire need for reform and the international rating agencies regular threat to downgrade Indias sovereign rating to junk status, this should have been a reformist Budget. To check a major cause of loss of revenue to the government on account of indirect taxes, introduction of GST is the only way but it has been given the go by yet again after hanging fire for many years now. Despite the recent uproar, in a series of periodic uproars, on black money stashed in tax havens there is no initiative to get access to what has been estimated to be a mindboggling amount of Indian wealth. Instead, we have the usual spate of token measures. Thus, the new surcharge on super-rich will only promote tax evasion whereas the need is to identify tax evaders who do not pay tax and bring them to book. Moreover, the additional allocations for women, e.g. Rs 1,000 crore allocation for a new all-women PSU bank and programmes dealing with SCs/STs as well as skill development among the young seem to be the customary sops that are likely to go the way of other such half-baked measures introduced in the past. For instance, despite MNREGA receiving huge sums, there are no assets to show for the expenditure that has only stoked inflation. The agricultural debt waiver programme has now been proven to a major scam not benefiting the intended beneficiaries and initial results of the Direct Cash Transfer scheme currently underway seem to suggest that it shall go the same way. The non-revision of income tax slabs and also making no change in the tax rates may be construed as an act of financial prudence but when the real income of aam aadmi is being eroded constantly and substantially by continuing high inflation, he cannot but wince in pain. Introduction of additional deductions from the total income of an individual tax payers and rebate of Rs. 2000 to those falling in the lowest slab, as a palliative, provide only notional respite to the aam aadmi. Lack of attention to governance by the present government its widely lambasted Policy Paralysis has taken its toll on the economy. This has created systemic supply side shortages, resulting in inflation, the brunt of which has been borne by the middle and poor classes, since food inflation has hit the country particularly hard. To rein the spiraling inflation, RBI has been forced to adopt policies that have increased interest rates. Unfortunately, that has had the effect of lowering growth, without taking good care of inflation. With interest rates on bank deposits becoming lower than inflation, savings have moved to lucrative avenues viz. gold, leading to soaring gold imports despite governments concerted efforts to rein them. In a country where locals are reluctant to invest in the domestic economy which is why they are investing in gold it is futile to expect foreigners to rush to invest into India.