Pranab Mukherjee’s budget for 2009-10 is long on generalities and short on specifics. The finance minister belied the expectations raised by his bold roadmap for reforms laid down in the pre-budget survey of the economy. He has opted for caution in place of courage. The thrust on social sector and infrastructure is in line with the overall policy of long-term and inclusive development but he failed to present an agenda to stimulate growth in all sectors of the economy. Nobody expected him to implement the promises on disinvestment, reducing the fiscal deficit and increasing the FDI in sectors like insurance at one go but he did not take even indicative steps in that direction. There was no clear mention of what the government planned to do on these promises. To be fair to Mukherjee, he may have been constrained by the resource shortage, the slowness of economic recovery, and uncertain global situation, but he seems to have missed an opportunity to send a signal to the economy that he would walk the reform talk.
There are certainly some positive elements in the budget. The tax exemptions on income tax would please a large section of the people. The fringe benefit tax and the commodity transaction tax have been abolished and this should benefit the corporare sector. The higher allocation for highway development, irrigation schemes, rural housing and job schemes will help boost infrastructure and social development plans. The reduction of interest on farmers loans and the schemes for weaker section give the budget a necessary orientation to the common man’s interests. Infrastructure and social sector spending is the strongest positive feature of the budget and their relevance will not be disputed. But the budget deficit at 6.8 per cent of the GDP is the worst worry and there is no hint of how this will be brought down.
The stock market does not correctly represent the economy in a country like India. But it is an index of expectations and performance of the most organised part of the economy. The crash of the stock market in the wake of the presentation of the budget may be partly because its unrealistic expectations. But the negative vote of the market is all a wrong reading of the budget.
