The principal problem with the economy today is that sentiment is very low. The Budget would have been an opportunity to improve sentiment.
Management of political economy may be the job of the Centre. But India functions on the principle of cooperative federalism: with the Centre, the states and, on some issues, larger cooperation with the Opposition.
The United Progressive Alliance (UPA) model has failed; where the political power lies elsewhere and the PM is only the executing agency.
Allies of the UPA are losing confidence because of the centralisation of the UPA. UPA ministers are either arrogant or don’t consult. Some are even vindictive.
The larger consensus is being vitiated. Consensus cannot come without a larger political dialogue with civility.
This Budget belies the government, it belies the allies. It represents a decision to play safe.
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Take the Railway Budget. We saw the same impulse at work. It was an effort to be too clever by half. The UPA used the Trojan horse of an ally to implement reform it was not brave enough to do itself.
This Budget does the same: to avoid taking bold decisive steps; it is an accounting exercise at a time when strong measures were needed because the economy is doing badly.
The Finance Minister had before him two alternatives. He could have done what was done after 1991. The economy was to have been made more competitive and profitable so the post-1991 experiment brought down taxes, implemented reform and got growth to fuel the economy.
The Finance Minister, with this Budget, has taken us to the pre-1991 era. If you look closely, he has increased service tax and brought new areas under service tax. This will make everything more expensive and less competitive. How will you compete with imported goods? All that tinkering with taxes will do is increase the prices of more goods.
And then look at the fiscal deficit and the tax collection. You say the economy will grow at 7.6 per cent. This is despite the fact that you will collect an additional Rs 176,000 crore in taxes.
Taxing more to balance the books is a pre-1991 measure. The net result will be, the economy will be more sluggish; there will be huge inflation; and the common man will have more burden.
Take NREGA. It is pertinent to point out that the allocation has been cut by Rs 7,000 crore. Reports say that in the period from April to December 2011, employment was given only for 32 days. This is the result of the performance of what the government calls its flagship scheme.
There is no mention of any forward movement on any minimal reform, let alone bold reform.
The target of fiscal consolidation seems to have been abandoned. There is no big idea in agriculture, only a minimal increase in defence.
The government needed to give a fillip to the agriculture sector, but the Budget is disappointing on this score too. It has increased the target for agricultural loans to Rs 575,000 crore but the data suggests that small farmers are unable to take bank credit due to high interest on agricultural loans.
It is hard to see how this Budget will enthuse the ruling alliance, the economy or even the foreign investor.
Arun Jaitley
Leader of Opposition,
Rajya Sabha