Sudip Bandyopadhyay

“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, …. lest Rome become bankrupt.” - Cicero - 55 B.C. These guiding principles laid down way back in55 BC, still holds a lesson for all of us.The current year’s budget has provided some SOPs for the “Aam  Aadmi” by removing surcharge on Income Tax, providing slightly higher tax exemption limits and few such other measures. But the capital markets were clearly disappointed with  the budget as the sky-high expectations were clearly not met. The deficit reached upto 6.8 per cent of GDP and no measures on FDI opening up   or PSUs disinvestment was talked about.  Consequent upon the above, the significantly higher expected government borrowings is likely  to create havoc in the money market resulting in crowding out of private sector borrowings and eventually end up pushing the interest rates in the economy higher.
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The impact of union budget on the common man can be discussed at two levels i.e, what  he directly feels or notices and the other  which he misses on the face of the document  or doesn’t feel directly.  While the first one impacts him and or affects his sentiments immediately, the second one is the  real long-term impact generating proposition. Aam Aadmi may not have been very happy with this year’s budget at the first level.However, a careful scrutiny of the economic environment of India and the global economic scenario very clearly points out that the Central Government’s emphasis on infrastructure and inclusive growth are absolutely appropriate.  India can move to the next orbit of growth and create a virtuous cycle of prosperity only by drastically improving it’s infrastructure and providing growth opportunities to the masses thereby reducing the income disparities and social tension.  Large government spending also provides the necessary growth stimulus to the economy as a whole and facilitates industrial recovery.

In a situation where credit markets world over are still in a state of inaction, the Government has very little choice but to try & directly start spending for infrastructure creation & inclusive growth.
On the whole, a careful study of the budget in the context of the present economic realities, very clearly indicates that the government has been extremely pragmatic while drafting the budget.  Of course, concerns remain regarding financing of the huge deficit.  However, if the same can be financed through PSU dis-investment, etc.  the pressure on the money markets would reduce. Selective opening up of FDI restrictions will also provide the impetus for accelerated growth.  All of these need not be spelt out in the budget document and can be done effectively out side the budget over a period of time in a prudent manner.

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