Let’s not stint in praise where praise is due: Finance Minister P.Chidambaram has deftly crafted Budget 2013 both to generate faith and optimism in the future and to lift the growth trajectory by a judicious blend of well-conceived incentives and imaginative initiatives. His reasoning for the various steps he details in the Budget comes through in a clear and convincing fashion.
But my fear is that the Budget will be celebrated for the wrong reason — for keeping the direct and indirect tax regime largely untouched, except for the justifiable 10 per cent surcharge on tax on earnings of Rs 1 crore and above.
It could be legitimately argued, though, that a tax structure that is marked by clarity, stability, a non-adversarial character, access to fair redress of disputes and ultimate oversight by the judiciary, contributes in its own way to higher compliance, more efficient collection and great investor confidence.
The Finance Minister’s proposal to set up a Tax Administration Reforms Commission to monitor the functioning of the tax machinery with a view to simplifying procedures and removing bottlenecks is also a laudable move and has not come a day too soon.
DRAG ON THE ECONOMY
Two features of the Budget make it stand out among the humdrum ones of recent years. First, sprinkled here and there in it are innovative and evocative strokes such as India’s first and exclusive public sector bank of the women, by the women and for the women with a whopping capital of Rs 1,000 crore; pilot schemes for composite and novel nutri-farms; social security package for the unorganised sector; launching of waste-to-energy projects in the public-private-partnership mode; and the unrelenting focus on improving the lot of, and expanding the opportunities for, women, youth and the poor.
There is a revolution of rising expectations brewing in respect of all these three segments of the society and it is good that Chidambaram has shown himself to be sensitive to the possibility of its assuming grave proportions.
Second, he has unerringly zeroed in on the factors that have been acting as a drag on the economy and sought to mitigate, if not neutralise, their harmful impact by applying a set of measures calculated to encourage a constructive participation on the part of all the stake-holders.
The Finance Minister has done well to pinpoint right at the outset on the current account deficit which has peaked to a record $75 billion. The country had better heed his blunt warning that at the present juncture, foreign investment has become an imperative and India has to go all out to welcome it by making business dealings easy, friendly and mutually beneficial.
Similarly, all efforts in all other directions to kick-start the economy can come unstuck on India’s frighteningly vulnerable infrastructural front. The amount (Rs 55 lakh crore) to be mobilised during 2012-17 is, in itself, mind-boggling. The Budget unveils a series of approaches to this daunting challenge. Among them are, a generous investment allowance, an infrastructure debt fund, rural infrastructure development fund, multilateral development banks, new ports, new industrial corridors, a special dispensation for roads network in the north-eastern region, revving up the India Infrastructure Finance Corporation and so on.
FULFILLING SENSE
Chidambaram’s expectation is that it will be possible to enthuse the private sector to pitch in with at least 47 per cent of the total funds requirement for infrastructure. Along with the Budgetary inducements, what will be needed is for the Government to constitute a standing council with the federations of commerce and industry such as the CII, FICCI, Assocham and Nasscom as also foreign institutional investors as members to draw up a roadmap laying down milestones regarding flow of funds and timely implementation of approved projects.
Another matter of deep concern is the unprecedented fall in the domestic savings rate from 36.8 per cent in 2007-08 to 30 in 2012-13. The Finance Minister has proposed to push it up by liberalising the Rajiv Gandhi Equity Savings Scheme and issuing Inflation Indexed Bonds or Inflation Indexed National Security Certificates. Here again, these measures will need to be supplemented by a vigorous nation-wide campaign.
The country’s poor record in R&D is another brake on progress and the substantial enhancements of allocations to departments of science and technology, atomic energy and space, address it to a large extent.
Altogether, this year’s Budget leaves a fulfilling sense of a job well done, with the Finance Minister having his priorities right and attending to them in a purposeful and practical fashion.