Will Bharat smile while India waits for non-budgetary incentives

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: Annual Budget is an exercise of stock taking therefore highly contextual; yet the balancing act it has to perform is not only in terms of revenue and expenditure, but need to address a number of dualisms that confronts Indian economy—for example, short and long term goals, rural and urban economy, agriculture and industrial (service) sectors, dualism of labour markets where 90% of labour force is in informal or unorganised sector, government versus private sector initiatives and not the least—social sector—so called people’s sector versus other formal sectors of the economy. Thus it is not a simple balancing line crossing, rather a number of such lines which are not parallel and the multiple crisscrossing in the web called national Budget is not easy to confront with.

The contextual reality is that India is facing the heat of global economic downturn; and it would be futile to take solace in still positive growth of 6.3% in 2008-9 compared to near zero or a marginal global growth. What is important is not the level of GDP growth, but what incremental growth is achieved during the previous year; and a growth deceleration of about 3.0 % or so, does translates in to innumerable formal and informal shocks the corporate as well as general public is facing. One sure consequence is a broad-based increase in unemployment but more specifically retrenchment of skill labour employed in selected export led industrial/services sectors where migrant and women labor has suffered.

The Budget 2009-10 presented this morning in many ways is a carried forward of the interim Budget, but not much is added in terms of the “big bang” second generation reforms nor strategy to plug a very high fiscal deficit of 6.8% which alone is 40% of the total budgetary allocation and note that this amount is not on hand yet that spending will take effect immediately. Often up to one-third of allocations is never actually appropriated and spent thus the effecting need of fiscal deficit will be much smaller. Although the tax to GDP ratio is declared at 11.5%, the proceeds are far too inadequate to ease the interest payment worth 4% of GDP and the inevitable expenditure on defence worth another 2.5% of GDP.