G N Bajpai

Happily enough the Finance Minister has presented the budget 2011-12 with sharper focus on fiscal consolidation, reforms in particular, financial services sector, boost to infrastructure and improving governance by simplifying procedures, direct transfer of subsidiaries and greater intervention of technology. Taking together this could be described as growth oriented budget.

Fiscal deficit is saught to be contained to 4.6% (with road map for compliance with FRBM Act) and limit Government borrowing to Rs 3.4 lac crore, which he bravely proposes to achieve without raising taxes – direct and indirect. In fact, marginal relief to individuals and corporate tax assesses is envisaged by raising the minimum exemption limit and bringing down the surcharge on corporate income tax. Even in the case of indirect taxes lowering of rates in customs and central excise, which was announced as stimulus measures have been retained. Implementation of Goods and Services Tax (GST) and Direct Tax Code (DTC) as from 01.04.2012 has been enshrined.

Reforms in financial services sector include amendment to Insurance Act, LIC Act, SBI and Subsidiaries’ Act, RBI Act, Banking Regulation Act, Companies’ Act, Indian Stamp Act etc., approval of Pension Fund Regulatory and Development Authority (PFRDA), setting up of Debt Management Authority, continued disinvestment of public sector and recapitalization of Banks. A significant move is to permit direct investment by foreigners in Mutual Fund schemes.

Infrastructure sector will be beneficiary of number of measures to facilitate financing, declaring new areas infrastructure, issue of tax free bonds, raising of corporate debt limit and lower withholding tax on dividend etc. on investment by the foreign entities. He has increased the outlay for Urban and Rural infrastructure – both physical and social, which includes education, health and housing, road and metro. Focus on employability of Human Resources is visible. Infra structure allocation has been raised to Rs2,14,000 Crore up 23.3% from last year. While doing all this Finance Minister has not lost sight of doling out monies for poorer sections of the population. 

Inflation control measures proposed are peripheral and may not even bring marginal impact. In the infrastructure two things, which have been missed out clearly are: (a) building up of strong regulatory framework, and (b) meeting large scale financing requirements.

Gap between input and outcome is the doubt one nurtures. Lack of will to implement may turn it into budget of intent. With the uncertainty looming large over Middle East and North Africa and the oil prices in particular, skepticism surfaces if the fiscal deficit level pronounced is achievable. Actually, financial sector reforms proposed is an announcement of clearance of arrears that had piled up on the legislative desk of Finance Minister. Disappointment is that no big bag reforms have been announced in the two core sector Agriculture and Manufacturing.  

Overall the budget portends a sense of positivity. However, it is the speed and sagacity of the journey of legislative work, which will eventually determine its impact on the growth of Indian Economy and the lot of teaming millions of citizens.