Though Finance Minister P Chidambaram does not think so, yet observers strongly believe that the interim budget has been framed with Parliamentary elections 2014 in mind.
Three months before the Parliamentary elections, Chidambaram in his last budget has tried to reach out to its potential voters – youth, minorities, dalits, tribals, women, farmers and the middle class -who had formed the core vote bank of the Congress-led UPA in the general elections of 2004 and 2009.
The interim budget had something for each of the target group. The budget has offered several sops for middle class, cheaper mobile phones for all, a venture capital fund for dalits, higher allocation for skill development and Nirbhaya fund to woo the growth and women, respectively and higher allocation for minorities.
The interim budget slashes excise duty on cars, 2-wheelers, scooters and small vehicles besides household goods and electronic gadgets so as not to disturb the running budget of a middle class family. Bigger and medium size automobiles also got some excise tax relief. The reason for slashing excise duty on cars was that car market had been showing slackness and production had come down.
The Finance Minister has shown consideration to the farmers and the student community in particular. Interest subvention scheme for farmers will continue for farm loans. Students who have taken study loans before March 2009 will be given moratorium on repayment. About 9 lakh students will benefit from this scheme and this will involve an amount of Rs 2600 crore.
Though, the Union Minister hopes that giving tax breaks and reducing prices would help to revive the economic activity and help generate more jobs. But, at the same time it shall deprive the Central Government of precious revenues, which are extremely important for a country battling slowdown.
However, the interim budget will be remembered for one important decision taken by the Finance Minister and that is accepting the one rank one person for ex-servicemen. It was their long standing demand and they had been vociferously protesting against Government’s unwillingness to make this concession. The scheme will encompass about three million ex-servicemen and will cost Rs 500 crore to the State exchequer. However, this was too small an allocation and may not serve the purpose because at least Rs 2500 crore would be needed for this head of expeditor. But the demand has been accepted in principle and modalities should be ironed out subsequently.
The budget has met the expected allocations to the Defence Ministry and the Defence Minister who was present in the House and listening patiently the presentation of the budget, smiled and felt happy that defence expenditures had been given full consideration. Defence allocations have been increased by 10 per cent. It was important to provide adequate allocations to Defence Ministry because the Defence Minister had been all along emphasizing that the country needed to have connectivity to its vulnerable borders and adequate preparedness in view of hostile stance from our adversaries on the borders.
The Finance Minister made some forthright remarks on the subject of tax evasion. It appears that he is not happy with the rate with which tax evasion is being plugged and as such there is need for contemplating more stringent measures to meet the menace. Central Government needs to further launch a multi-fold strategy to further tighten its noose around large number of tax evaders so that they are brought into the taxation net during the fiscal year.
Chidambaram has, in all probability, made a last-ditch attempt to win back voters by announcing more funds for health, rural jobs, roads and food subsidies, and to speak about the Government’s achievements in the last 10 years.
As predicted by many before the onset of Lok Sabha election, the speech of the Finance Minister actually highlighted only the achievements of the Congress-led UPA during its two terms. However, much of the good work has been mis-management in the second term and though, India managed well in the post-2008 era after the global economic crisis, it squandered away the opportunity to consolidate over the next few years.
However, the Union Minister kept his word of not breaching the red line for fiscal deficit. The matter had assumed great significance in view of the threat from international rating agencies to ‘downgrade’ the Indian economy. Mr Chidambaram had promised to cap the deficit slide to 4.9% and he managed to contain it to 4.6% of GDP and forecast it to keep it at 4.1% of the GDP.
Since the last one year India was under so much scrutiny because of a probability of a rating downgrade, we have been in an environment where the policy makers have been constantly communicating with various stakeholders.
On the positive side, Chidambaram expects that GDP expansion in third and fourth quarters of 2013/14 reaches 5.2 per cent and the growth for the whole year was expected at 4.9 per cent. We hope these numbers translate into reality in times to come.
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