Budget Musings

Little was expected of this budget. Yet, this budget did not fail to disappoint the stock market. Budgets have long ceased to be sensational. ‘Dream’ budgets are no more doable. Even if a finance minister risks delivering a budget with the stock market in mind, it will not materially help the economy. The finance minister is too experienced to know this. So, Pranabda simply stuck to his long term priorities.The end result was that this year’s budget ended up being very pedestrian. The markets were hoping to be promised better fiscal management, lower outlay for subsidies, higher disinvestment and better governance of the economy. By coming clean on last year’s deficit, the finance minister virtually ensured that next years deficit looks respectably lower. The ‘ base effect ‘ worked perfectly and we have a fiscal deficit target of 5.1% of GDP for FY 13. However, the subsidy bill showed no signs of reducing and disinvestment targets were lower. This budget definitely was short on big ideas. In fact it was short on big bang reforms. But, the finance minister only knew too well that he did not have a mandate to pursue reforms aggressively. And, he worked on the principle of doability.

To be fair, the budget had its share of bright spots. To name a few, the scheme to promote investment in equities (in Rajiv Gandhi’s name, of course), the raising of duty on gold to 4% (this should reduce imports and see more resale in domestic markets), the simplification of service taxes (with a negative list in place), the increase in farm credit by Rs.1,00,000 crores (this should see higher investment in agriculture and put more money in the hands of rural consumers) and the higher limits for raising infra bonds. The budget did not shy away from raising taxes modestly where ever necessary. Populism was restricted to welfare schemes for the poor.

The Aadhar scheme is being readied as a platform on which second generation reforms will be carried through. The battle against subsidies is about to begin. The FM gave enough ‘AADHAR’ of that. And, that is the redeeming feature of budget 2013.

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