Indian economy and Budget

Recently, the Finance Minister(FM) has tabled the budget for the year 2012-13 in the Parliament.

For many, it is an average budget with no clear cut signals towards any meaningful economic reforms.

FM had admitted that the time is not conducive for large scale reforms due to turmoil in world economy and domestic and political compulsions.( Despite hectic political rallies by Rahul Gandhi in Uttar Pradesh, one of the largest States in the country, Congress could not do well in the recently held Assembly election.)

Railway Minister has to submit his resignation to the Prime Minister for defying the wishes of TMC Supremo Mamata Banerjee, the party to which he belongs. At the time of writing this, it is learned that the President has accepted the resignation of Railway Minister. The reason being hiking the passenger fares after a long gap of eight years. This is economic price of political democracy.

On the Fiscal Front, FM had admitted that Fiscal deficit would be hovering around 5 to 5.3%. GDP growth for the next year would be around 6.9% to 7 %.

To reduce the fiscal deficit, Budget has increased the burden on common man by propsals like hiking indirect taxes( widening of tax net and rate from 10.3 % to 12.33%).

Infrastructure requires whopping Rs.50 lakh crore for the next 5 years, out of which Rs.25 lakh crore would come from Pvt. Sector. This requires political action and conducive economic reforms.

The target of Agriculture Sector( ground level credit) has hiked by Rs.1 lakh crore to Rs. 5.75 lakh crore. This is not sufficient in the wake of rise in food prices and high inflation rate in the recent past.

Overall, a political budget with no clear cut direction. Stock Market has traded in red on Monday, which also highlights the fact that changes expected at the economic front were totally ignored by the FM in his budget.

Year 2014 is crucial for Congress Govt, as there would be General election in the country.