The Finance Minister's Budget presentation was realistic in admitting that the Centre's fiscal deficit was at 5.9 per cent in FY 12 and efforts will be made to bring it to down to 5.1 per cent in FY13.
This will be achieved by increasing indirect tax collections and finding ways to plug the subsidy leakages with initiatives like direct transfer of subsidies in fertiliser sector/LPG/Kerosene and computerising the entire PDS system.
The backbone for these initiatives will be the UID scheme which has been given a boost with an outlay of Rs 14,232 crore for FY13.
The Government has stated its intent to increase contribution of manufacturing sector by allowing import of plant machinery and exemptions in customs duty in sectors like fertiliser, dairy, textiles, mining etc.
Sadly, the FM has made no mention of labour reforms which is a key requirement for competitiveness and jobs in manufacturing.
We were expecting some clarity on the existing urea policy which is long overdue, and decontrol of the sugar sector.
The Finance Minister has highlighted that the agriculture sector is priority and proposed an 18 per cent increase in outlay for the agriculture sector from Rs 17,123 crore to Rs 20,208 crore.
Rural Infrastructure
The Rs 20,000 crore allocation for rural infrastructure development, out of which Rs 5,000 crore has been allocated for warehousing. FM has also mentioned that approximately 3 million tonne warehousing capacity would be added in the next fiscal, .
The Budget has proposed to promote micro-irrigation and has made provision for viability gap funding for investment in irrigation/common infrastructure/soil testing etc. Also the government has proposed to form a new company which would invest in irrigation projects.
Credit
Agriculture credit has been increased by more than 1 lakh crore to Rs 5.75 lakh crore in FY13, and the benefit of interest subvention which was given last year will be continued for the next fiscal with an additional benefit of 3 per cent for making timely payment.
Nabard has been allocated Rs 10,000 crore to fund RRB's for small and marginal farmers. The budget has proposed to convert Kisan Credit Cards into a smart card for ATMs.
Market Access
The FM has not done full justice to the market access issue as APMC reforms have not been addressed, but he has mentioned that a consensus is being developed on 51 per cent FDI in multi-brand retail with the various State governments. Also the issue of free inter-State movement of grains has not been addressed as this would give the farmer the choice to decide where he wants to sell his produce.
Last Mile Delivery
The Government has allocated Rs 200 crore to incentivise research in seeds for breakthrough technology by institutions and research teams. To increase the production of pulses, he has spoken on developing and integrating of pulse villages. 150 per cent tax deduction for agri-extension is good.
Another issue which the farming sector has been facing is availability of labour, this has been addressed by the NREGA scheme getting linked with the farm sector and Rs 3,900 crore has been marked for FY13.
The fertiliser sector has also been covered as a priority sector in the Budget and the FM said that in order to encourage the use of domestically produced fertilisers, Government would encourage the use of SSP. This will help the country cut its dependency on imported phosphatic fertilisers. We welcome the 5 per cent exemption in custom duty on fertiliser plants.
In a nutshell, the Budget has been a tightrope walk for the Finance Minister looking at controlling the current account deficit as well as the fiscal deficit to avoid pressure on exchange rate as well as to increase overall competitiveness of the nation.
Also, with uncontrollable factors like a capricious monsoon, natural calamities and Euro zone issue, the best we can hope for is some macroeconomic stability.
(The author is Chairman & Sr Managing Director, DSCL & Chairman, CII National Committee on Sugar.)