The Budget 2009 is around the corner, delayed due to the elections held in April-May. The Budget, in its current form, is redundant. It is a mere projection of the reveues and expenses. It also is a forum for outlining policy guidelines.
Much is made of the relevance of the budget and its approval by the parliament. What it does not tell is that once presented, everyone forgets about the budget. There is no accountability, as year after year there is a huge mismatch between the projected figures and the actuals..
Congress is in a spot of bother this time around. The wasteful expenditure committed during the last term (like the wider coverage of NREG that has only helped to line the pockets of chota netas, the pay commission awards and the much publicized Rs 60,000 crore farm waiver which was deftly spread over till 2011) is coming back to haunt them. Nothing much has been done on fiscal prudence. The deficit, which was brought down with great difficulty to 2.5% of GDP, has been allowed to raise and is alarming at 6% plus, and still climbing. P Chidambaram has taxed the nation to the full, with hardly anything left to be taxed. Hence, new revenue generating opportunities are limited. With economy slowing down, it is obvious that even the existing tax collection will not be achieved in the coming year, while the non plan expenditure has been raising steadily. With country facing deflation, industrialists ( the biggest beneficiaries of Government largesse ) who have funded the election campaign will definitely take their pound of flesh. Thus while Government would dearly love to increase CENVAT from 2.5% to at least 3.5%, it is unlikely to do so. There is also pressure to increase the limit of IT to put more money into the pockets of the consumer. However, successive governments have repeatedly ignored the salaried class immediately after an election and this is likely to continue. You can expect some serious policy announcements pertaining to Infrastructure development. The government has at last woken upto the benefits of quality infrastructure, but we are decades away from achieving it. However, any step in this direction is welcome. Exporters are clamouring for sops (undeservedly I would say. We, as a nation, had to pamper exporters once because of the poor BOP, but since the situation is different now, we should tell the exporters not to hide behind government doles in order to be sustainable). Reduction in subsidies is not on the cards. What is on the cards are definitely more social sector spending. But how are we going to finance all these things? One way is to sell the family silver - Disinvestment. Money raised out of selling assets should go for constructive spending. It will be a pity if it goes to cover revenue deficit, which is unproductive. The second route is to raise money through debt financing. Congress is a past master at this and had brought the country to bankruptcy in early 1990s by adopting this route. It is likely that they will have to resort to this, for simply there is no other option available.
In short, what this means is that there will not be much outlay for development projects but more panic reaction to cover revenue deficit. This will be a pity, as a recession is the right time to invest in development projects so that we are ready when the economy enters the boom phase. But then, visionary planning has never been the forte of our politicians.
