Finance Secretary Ashok Chawla today said that there was more confidence in the economy than what was there 12 months back, though he agreed that a high growth of 9 per cent needs agriculture to grow by at least 4 per cent. He said the partial withdrawal of stimulus measures through increase in taxes was a calibrated move, and reiterated that the stimulus of higher spending was still there.
“It has been built on four pillars of high growth, fiscal consolidation, public spending of high order to achieve inclusive growth and better financial sector,” he said in post-Budget conference. He labelled the Budget as “pragmatic, balanced and realistic”.
Though Chawla listed inflation and deficient monsoon as short-term concerns, he dismissed the suggestion that the Budget was inflationary and would hit the common man. “It (budget proposal of increase in excise duty on diesel and petrol) is going to cause a blip right now...our calculation is 0.4 to 0.43 per cent,” said Kaushik Basu, chief economic adviser.
Finance Minister Pranab Mukherjee raised Custom and excise duty on crude oil and petroleum products, besides announcing an across the board 2 per cent increase in excise duty. Inflation soared to 8.56 per cent in January, surpassing the RBI’s projection of 8.5 per cent. According to Basu, inflation was likely to remain firm for some more time, but would remain within the double-digit mark till March-end.
Chawla said Re 1 a litre increase in excise duty on petrol and diesel will give the government Rs 9,300 crore and 5 per cent Customs duty increase on crude oil and petroleum products would yield Rs 16,800 crore. Interestingly, the 2 percentage point increase in excise duty on other products would yield the government Rs 14,000 crore and, therefore, the dependence on oil sector is high.
Hike in minimum alternate tax (MAT) to 18 per cent from 15 per cent would fetch an additional Rs 6,000 crore, but the government would sacrifice Rs 5,000 crore on account of corporate surcharge reduction, said revenue secretary Sunil Mitra.
The budget also aimed at plugging certain loopholes through clarifications. V Sridhar, chairman Central Bureau of Excise and Customs, said, “The broad philosophy has been to plug leakages and to facilitate trade.”
Meanwhile, a 2.8 per cent fall in agriculture growth and 2.2 per cent decline in community and public services slowed down the country’s gross domestic product to a mere 6 per cent in the October-December quarter. It happened despite an impressive 14.3 per cent growth in the manufacturing sector. The economy had an impressive 7.9 per cent run in the preceding quarter. To attain the estimated 7.2 per cent GDP growth during 2009-10, the fourth quarter growth has to be at least 8.8 per cent. Finance Secretary Ashok Chawla admitted that the fourth quarter would be burdened, but added that usually the January-April did better than other quarters. The impact of drought brought the growth to a level lower than 6.2 per cent GDP witnessed in the same quarter in 2008-09.
The cumulative growth for April-December 2009 is 6.7 per cent compared to 7.1 per cent in the year-ago period.
