BUDGET 2013
Some time
back my only obsession in budget would be about the income tax slabs and some
of the commodities especially electronic gadgets. However in my current
capacity with a little theoretical knowledge about financial institutions, I
wish to present my views about the Budget 2013-14.Please show some leniency on
my naiveties but don’t forget to point out them.
I have the
proclivity to look out for numbers at the outset in any budget than the policy
statements and their concomitant procedures. Hence containing the fiscal
deficit (FD) within the promised revised estimate of 5.3% of GDP would be
acceptable though the budget estimate was targeted slightly lower at 5.1%. FD
refers to the total financial liabilities of the government mobilised through
external borrowings from resources outside India and the internal borrowings
mainly monetised through sovereign bonds dealt with by RBI.
But the fact that the total sovereign debts had been steadily raising
and have reached over 50% of the GDP is an ominous caveat which is quite
obvious from the data that over 25% of the revenues are raised through debts. I
have never seen my mother relying on meeting over quarter of our household
expenditure through credits from others. But this is a political reality in a
re-emerging economy like ours with a great deal of inequalities both social and
natural resources.
With not sufficient fuel resources in the country, the dependency on
crude oil is enormously large and would be so for a longer period till an Indian
surplus fuel alternative is identified. The bureaucratic red-tape procedures and
the associated delay in awarding clearances of the energy sector projects when
supplemented by the over-envious private sector motivated to increase profit at
any cost as seen in the Krishna-Godavery Natural Gas basin and the
over-enthusiastic socio-natural activists opposing development projects make
dependency on import of energy resources like coal, crude oil incumbent. Hence
we have no alternative but to import energy resources which entails larger
dependency on foreign currencies.
Increase in imports when compared to the exports would increase the
Current Account Deficit (CAD). The widening CAD which is indirectly a measure
of foreign exchange demand in the economic system makes foreign investment
inevitable and the announcements like allowing Foreign Institutional Investors
to invest in Debt funds and rationalising portfolio investors are aimed at
increasing it. The other source for meeting the CAD is through external
commercial borrowings (ECB). So increase in ECB would be a reality considering
the current scenario reduction in FII and FDI.
And the Finance Minister had attempted to create an impression as if he has
generously provided each ministry with increased funds though the fact is that
the increased allocation is with respect to revised estimates (RE) and not the
budget estimate (BE) 2012-13.Never wonder we are able to achieve the 5.3% FD
target by having a dent on the planned expenditure for about 20%(about 1 lakh
crore rupees) compared to the BE-2012.
Reduction in Plan Expenditure is akin to my mom withholding expenditure
on my educational and health needs without convincing me to reduce my pocket
money or denying me a vacation trip. Planned Expenditure would help in boosting
productivity by vesting the citizenry with necessary physical infrastructures
like transport, irrigation, communication facilities etc and social
infrastructure like health, education etc which are necessary for continued employability.
Non-plan expenditure includes the maintenance expenditure like running the
administration, subsidy etc.
Also to his comfort he had
called reference to the RE and BE without consistency. For allocation under
Food Subsidy, his increased allocation is with respect to BE but to RE in
majority of the cases. So it is all about juggling with the numbers for his
convenience. The financial and other administrative ministries apparently are
ready to appropriate money through supplementary and additional grants which is
evident from the larger gulf between BE and RE and also the actual estimate. BE
refers to the estimates of revenue and expenditures as initially planned and
presented to the legislature for a financial year whereas RE refers to the
revised estimate that is modified BE reflecting the recent realities of the
ongoing financial year. Fiscal adeptness entails closeness of the financial
estimates with the reality.
Sector wise, I would rate the proposed plans for agriculture as the most
convincing one as good deed know no periodic restrictions. The allocation for
crop diversification in the Green Revolution rich areas which had become ecologically
vulnerable with increased land salinity and reduced water table level is a
‘delayed’ welcome step. And ideals of extending green revolution in the Eastern
areas should keep in mind the sustainable agriculture practices. Promotion of
nutrition rich fortified grains in nutrition deficient areas would have to be
carefully persuaded.
The
above prospective plans in agriculture could well be read as the governmental
effort of wide-basing its skewed food grains basket which is in favour of wheat
and rice. It is also a positive step
that government has promised to create a fund(5000 Cr INR) for promoting
decentralised storage of grains at the panchayat level. While total production
of food grains is over record 250 million tonnes for the successive years recently,
we have seen increasing cases of malnutrition too in the recent times. This
paradox could be sternly dealt with through decentralised construction of
storage facilities preventing stress selling by farmers for want of storage
options and also is an indirect acknowledgement of the role of Panchayat Raj
Institutions.
But with every
penny allocation opens the window for corruption which when compounded with
bureaucratic insensitivity makes the total effort futile. The allocation of
agricultural loans reaching landlords with agricultural farm house lands and
large farm-hold farmers are manifestations of unclear technical procedures and
insensitivity. A PSU bank employee promised to provide me with a jewel loan at
6% if I could submit an agricultural land tax chellan even in someone else’s
name. Hence procedural formalities of the ambitious allocation of 20000 cr INR
for Rural Infrastructure development and 5000 cr INR for rural housing have to
be reflective of the needs and the realities with sensitivity to the needy
poor.
Efforts have been made to create positive investment climate and to
boost manufacturing by reducing or parting off the customs and excise duties in
textile and traditional handicrafts industries,aircraft
MRO(Maintenance,Repair,Operation) machineries and by providing with 15%
investment allowance for investments over 100 cr INR in plant and machinery. Ideals
of establishing Semi-conductor wafer fabrication is certainly positive so that
indigenisation in defence or electronics actually is indigenous.
Also the
prospects of 10000+ buses to be purchased for improving urban connectivity
would be welcomed by commercial vehicle manufacturers. Here the requirements
have to be carefully drafted such that the vehicles are accessible to the
differently abled persons and the old aged who together constitute over 25 cr
of Indian population and thus the promised universal access is complied with.
The allocation of 5000 cr INR to SIDBI to refinance Micro Small and
Medium Industries would provide relatively easy credit access to MSMEs which
contribute over 40% of Indian exports and employment opportunities. But the
demand for relaxation of capital norms that would qualify one as a MSME defined
very earlier in the past is not heeded to and warrants a re-look reflecting the
inflationary tendencies and the value of plant and machineries.
Physical infrastructural announcements like new ports, Industrial
corridors would provide impetus to investments and also help in increasing
productivity. Road Regulatory Authority(RRA) envisaged to be set up is a
reflection of the mis-management of PPP mode of road and highways construction
contracts and have to be appropriately empowered to deal with dilatory, low
service quality in addition to swiftly granting clearances for such projects.
The discretion with which the contractors collect user fee for accessing roads
and the lack of accountability and transparency in such contracts are matters
of immediate concern to the RRA.
Renewable
energy enthusiasts are enthused by the declaration of generation based
incentive for wind energy but the desperate financial situations of the state
run power distribution companies(Tamilnadu Discom has over 50000cr INR loss)
responsible for purchase of the grid connected power would make them cynical.
It is a well known fact that under-pricing of electric energy in order to woo
prospective electorates on the one hand and paying at higher rate for private
power generators without invigorating public power generation capacity at the
other hand are quintessential mal-administrative reasons for such a whopping
loss.
Details of the 1000cr
INR Public Sector Women only bank are not out and without personnel
sensitivities and procedural simplicities, this proposed institution would
become redundant. Also is the of 1000cr INR for women safety and security for
which details are un-known. Similarly 1000 cr INR for National Skill
Development Corporation aimed at imparting employability skills would be
fruitful if realistically drafted, to meet the ambitious 10 crore new jobs in
manufacturing sector and to facilitate the transition from agriculture to
skilled and semi-skilled jobs smoothly. And there is no doubt about the
bourgeois interest in inflation-indexed investment schemes as an alternative
for non-productive gold, for which the details are to be announced.
In the revenue front, the target of 55000 cr
INR through PSU disinvestment and allowance of 50000 cr of tax free
infrastructure bonds are too idealistic estimate considering the performance in
the recent years. The increase in surcharge for super-rich and the excise
increase for certain commodities would mobilise extra 19000 cr INR only and
hence the ambitious target of reducing FD within 4.8% of GDP is possible only
through repeating this year’s tactics or by strictly following the words of Finance
Minister himself that it is up to the individual ministries to deliver outcome
through good governance,fiscal
prudence,close monitoring and swift implementation. Rationalisation of
Centrally Sponsored Schemes that entail redundant personnel structure at the
states’ level is a step in this direction.
Also the estimated
reduction of subsidy by 25000 cr INR ostensibly would be attempted through
reduction in fuel subsidy which certainly impact larger sections of vulnerable people.
Duel pricing of diesel and domestic LPGs could well be attempted with safe
precautions. And a mere allocation of 10000 cr INR for Food Security which
would be a political trump card for UPA government is a clear indication that the
promised right would not be vested in the immediate future. In food subsidy
bill, a reduction of 5000 cr INR from the RE 2012 is planned which seemed to
have been decided without considering the actual realities and with
governmental ideal of providing food security.
Hence
I would consider this budget as an attempt to strengthen the macro-economic
indicators however without giving up the political demands for wooing the
prospective electorates like farmers, women and youth.
