Economists sceptical of Budget proposals

Even as farmers and salaried class are elated with the announcements of finance minister P Chidambaram, economists have expressed their reservations of the repercussions of the populist measures in the long run on the economy.

Former member of the Planning Commission and economist P R Panchamukhi while welcoming the proposal to waive quite a bit of the farmers' loans, said it was a temporary measure but not good for the value system of the society.

It would affect the banking system adversely and instead of making farmers go in for loans the government should think of providing them remunerative prices so that they would not be in caught in a debt trap, he added.

Panchamukhi felt the budget has ignored the likely inflationary trend transmitted from developed countries like the US to India. There are no anticipatory measures in the budget to control transmitted inflation. The FM should have introduced measures for savings generation so that additional purchasing power is diverted for productive purpose. IT exemption measures to salaried class should have been supplemented by savings promotion measures.

For senior citizens the real help would have come if interest rate on their savings had been raised or specific schemes with higher rate of interest were provided.

The hike in allocation to education by 20 per cent is a good move but the proposal to start 16 central universities will result in funds being thinly distributed among the varsities. The existing universities are starved of funds and they should have been strengthened.

"Union Budget should have taken cognisance of the vulnerability of Indian economy to the global market," he said.

Member of the Tax Reforms Committee headed by Veerappa Moily, R V Dadibhavi said it has failed to reduce revenue deficit. As per the Fulfillment of Fiscal Responsibility and Budget Management Act (FRBMA), phasing out of revenue deficit by 2008-2009 is a must. But the FM has given it a go by.

The budget is to be viewed from the point of increasing overall growth, fulfillment of FRBMA and extent of furthering the consolidated Goods and Service Tax.

Another economist N G Chachadi, Principal, Karnatak Arts College hailed the FM for catering to the needs of rural India. Stating that the FM has intelligently tried to strike a balance between growth and politics, he said a World Bank report says 80 per cent of the farmers' borrowings come from the unorganised sector.

"So how far loan waiver will really help the farmers is a big question," he wondered. Welcoming the tax exemption on medical insurance for parents by their children Chachadi said this would ensure old age parents' security.

Nayanatara Nayak reader at Centre for Multi-Discliplinary Research is disgusted to see the way each political party is trying to woo their vote banks through loan waiver. There is nothing that speaks of regulating private lending and interest rates, which according to many studies is one of the main causes of suicides by farmers.

Money lenders and the private banks are likely to get more shares in rural credit on account of the hesitance in lending from scheduled and commercial banks, she added.