A Budget of missed opportunity

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: Budget 2009-10 was long on promises, but as the UPA government’s response to the most difficult year for the Indian economy in a decade, it fell short on action.

The finance minister eschewed politically sensitive topics like setting a disinvestment target, but held out the promise that all public sector companies would have to tap the stock markets more.

Similarly, he set up an expert committee to advise the government on a sustainable system of pricing petroleum products without acting on the suggestions in the Economic Survey. And, even as he set a fiscal deficit target of 6.8% — the highest in 16 years—he said the government remained committed to fiscal prudence and would act on the recommendations of the 13th Finance Commission due in October.

Mukherjee’s stimulus package for the economy too was rather limited at just Rs 60,000 crore, about 6% of total government spending for 2009-10. “A single Budget speech cannot solve all our problems, nor is the Union Budget the only instrument to do so,” he said.

The minister’s arithmetic is, instead, based on the presumption that increased private consumption would help sprout ‘green shoots’ of economic recovery. So the much-reviled fringe-benefit tax now stands scrapped and the 10% surcharge on personal income tax has been done away with, even as taxable income thresholds have been raised. He also decided to retain service tax and excise duty rates at the levels slashed to in earlier stimulus packages — a move that would help industry to keep prices low.

Mukherjee will still end 2009-10 with an unprecedented Rs 10,20,880 crore in government expenditure, but an almost flat tax revenue projection of 2% over the revised estimates. Compared with the budget estimate of 2008-09, there is a decline in revenue of 6%.

So, with allies like the DMK and the Trinamool Congress replacing the Left parties as the UPA’s ‘anti-reform’ brigade, Mukherjee, a self-confessed gardening enthusiast, had to remain content with planting the seeds of gradual change in India’s economic landscape. And just as chief economic adviser Arvind Virmani said that the radical reform ideas in the Economic Survey for 2008-09 are to be considered over a five-year period rather than in a

single annual exercise, Mukherjee’s first Budget in the UPA’s second innings was more about intent for this “five-year journey” as he stressed right in the beginning of his speech.