While presenting the annual budget 2012-13, initially Pranab
da managed to make the market supporters a bit unhappy- some saying
‘uneventful’, some ‘disappointing’, and ‘another opportunity lost’(all on one biz
channel, I watched). This was a sign to me that perhaps the budget was people
friendly to some extent, and soon the market wala would start terming it as
‘populist’ budget. It’s interesting to note that if the budget (and any
government policy) is pro-people then it’s termed as populist with a negative
connotation. In spite of reduction in subsidy, Pranab da did come out with some
so called populist measures, at least in the announcements made in the budget
speech. For example, fully implementation of the food security bill during the coming
year, with improved PDS and increased allocations to schemes like National
Rural Health Mission (NRHM) and Rashtriya Krsihi Vikas Yojna (RKVY). Allocations
to Tribal Sub-Plan and Scheduled Caste Sub-Plan also increased. There is also an increase in the allocation
made to Integrated Child Development Scheme.
However, it seems the prices of petrol and diesel will
continue to rise as the budget proposes a massive cut on petroleum subsidy.
This with an increase in service tax from 10% to 12% is going to keep inflation
high, as services contribute more than 50% of the economy. So, here come the
contradictions thrown upon us by the Finance Minister. The increase in food
subsidy is merely Rs. 2177 crore, from current year’s revised estimates to Rs.
75000 crore for the coming year. Now how can the government implement the food
security bill with this meager increase is not understandable. Similarly, the
increase in NRHM is less than Rs. 2,000 crore and increase in Rashtriya Krishi
Vikas Yojna (RKVY) is merely Rs. 1,400 crore. About 20% increase in Sarva Shiksha Abhiyan is
also not much, considering the implementation of Right to Education Act. The estimated spending on MGNREGA during the
current year 2011-12 has been revised to Rs. 31,000 against the budget
allocation of Rs. 40,000 crore. The declined spending on MGNREGA does not seem to
be any cause of concern for the union government as it has allocated only Rs.
33,000 crore for 2012-13 to MGNREGA, Rs. 7,000 crore less than last year’s
budget estimates. The increase in Tribal Sub-Plan (TSP) and Scheduled Caste
Sub-Plan (SC-SP) was highlighted by the Finance Minister in the budget speech,
yet the total allocation to these two sub-plans, meant for development of two
most deprived sections of Indian society, is still well below the norms. Total
allocation to TSP is only 3.33% of central plan expenditure while total
allocation to SC-SP is merely 5.70%, which should be 8% in case of TSP and 15%
in case of SC-SP. This is important for the state of Rajasthan also, as the
state has 12% of tribal and 17% of dalit population.
If we look at budget from the perspective of the state of
Rajasthan, there has not been any specific programme or allocations to the
state. However, some of the announcements will have some direct or indirect
impacts on the state. Exempting solar plant and equipments from customs should
boost the solar power generation in the state, for which the state has immense
potential. Exemption of silver jewelry from excise duty should help the state’s
jewelry work. Slash on customs duty on machinery for mine surveying and
prospecting from 10% to 7.5% should help the states mining sector.
The Delhi-Mumbai Industrial Corridor (DMIC), passing through
Rajasthan, also gets a mention in the Finance Minister’s budget speech. DMIC
is being developed on either side of the Dedicated Rail Freight Corridor, for
which land has been acquired in the state. Finance Minister mentioned an
earlier approval of Rs. 18,500 crore for DMIC over next five year as well as a
Japnese assistance of US $ 4.5 billion for the project. Though announced and
approved earlier (and only mentioned in this budget), this project is of
immense importance for the state. Hopefully it will generate employment in
industries developed in the corridor. This, however, will also have its social
costs like displacement and land acquisition and the environmental issues.
Most of the population in the state, however, depends on
agriculture. Increase in farm loan target should help the Rajasthan farmers as
well, if implemented properly. However, slash in petroleum subsidy means that
we are going to see hike in diesel and petrol prices, which will ultimately
hurt the farmers as well. Increased outlay for RKVY and National Food Security
Mission, though not very substantial, is important, as both the programmes are
being implemented in Rajasthan as well. But the state is also implementing
schemes like Golden Rays, under RKVY, which is promoting Monsanto seeds among
the tribal farmers of southern Rajasthan at the cost of their own traditional
seeds. Studies suggest that such moves are not in favour of farmers in long
run. Creation of a government owned Irrigation and Water Resource Finance
Company to help micro-irrigation scheme and waste water and sanitation schemes
as well as contract farming would be an interesting move to watch on as the
state does need small irrigation and waste water management schemes considering
the scarcity of water in Rajasthan. However, is the promotion of contract
farming desired in the state?
Over all it seems like a balancing act for the finance
minister given the political compulsions his government is facing. He has tried
hard to please the market walas and at the same time has also made some so
called populist announcements which, over the year, have become only solace for
the aam aadmi (and aurat), as we have accepted that our overall
policy direction has to remain market and industry friendly. By afternoon, as I
kept watching that TV programme, the mood in the TV studio was not that
pessimistic. The FM’s intention to check the subsidy and keep it below 2% of
GDP, not changing the corporate tax rates, increase the upper limit for 20%
income tax from 8 lakh to 10 lakh per annum has been received well. Hope the so
called populist measures for aam aadmi and aurat taken in the
budget work in their favour in the state as well all over the country.
