Fiscal consolidation and high growth rate?the Budget puts empahsis on these two areas. Anyway, some grey areas call for attention.

Macro-economic outlook and fiscal deficit: A major macro number, the fiscal deficit-GDP ratio, is well below the revised estimates (RE) of 6.7% for fiscal 2009-10. It is slated to stand at 5.5%. However, the fiscal strength, as reflected in the lower deficit-GDP ratio, hides the degrading quality of the deficit in the RE for 2009-10 as well as in the Budget estimates for 2010-11.The revenue deficit-fiscal deficit ratio shows how much of the borrowing is going to finance current consumption, which stands at 79% for 2009-10 in RE and at 73% in 2010-11.This means that for every single rupee borrowed, 73 paisa won?t earn back anything. So, the government will have to borrow more.

Distribution of spending: There was hardly anything in the Budget that reflected the government?s commitment to achieve 4% farm sector growth. The only commendable thing was that it contained some provisions to ease down credit flow to farmers.

The other positive thing was yhr considerable boost to infrastructure sector the Budget seeks to provide. This is a welcome step, but not enough to compete with China?s infrastructure spending levels. The non-Plan expenditure is expected to grow only by 6% for 2010-11.This can be termed as too modest an estimate, as in 2008-09, the non-Plan expenditure grew 16% over the actual, given the double-digit food inflation, the spate of fiscal stimulus the government offers to various sectors and the increase in the salaries of government employees.

Tax proposals: The increase in Cenvat rate from 8% to 10% and keeping the service tax rate at 10% set the stage for a unified GST by 2011.The cut of surcharge on corporate tax to 7.5% and increase of MAT to 18% might hurt India Inc, but it?s necessary to contain the Budget deficit. To give relief to the middle class, the tax slabs have been widened, but that is just to compensate for the increasing prices due to inflation. So, it?s a promise only half fulfilled.

The author is MBA student of Delhi School of Management, Delhi Technological University. Email: ishaan2sharma@gmail.com