Budget 2006: Mixed results

I had earlier put down some expectations for the budget. Some of them were fulfilled. Others, I didn’t expect to be fulfilled. Yet others, which I expected to be fulfilled, weren’t. Here’s how it went.

1. Improve infrastructure: With Rs 18,696 crore allocated for Bharat Nirman Mission, Rs 4,595 crore allocated for Urban Renewal Mission, metro rail consideration for Hyderabad, Chennai, power generation capacity to be increased 5,038 MW this year, and a host of other measures, the FM has done as expected, full credit to him. Implementation however has never been our strong point. The FM needs to ensure that the money reaches where it is required to go.

2. Create job opportunities in rural areas: Rs. 14,300 cr spending for rural employment programme, 50 m rural telephone connections in 3 years, budgetary allocation for Rural Infrastructure Development Fund has been stepped up to Rs 10,000 crore in 2006-07. A job well done, again pay attention to implementation.

3. Encourage English education: Education allocation up in FY-07 to Rs 24,154 cr, allocation for national Urdu education programme increased to Rs 13 crore from Rs 10 crore. Nothing done here. A big disappointment. The Urdu education corpus was unnecessary. Minority Politics?

4. Abolish (or at least modify) FBT: FBT was modified, albeit symbolically. No real changes, except reduction of FBT on business conveyance from 20% to 5%. Telephones at least should have been spared.

5. Tax agricultural Income: Did not realistically expect this, especially from a government whose strings are pulled by the left. (P.S.: Nothing was done)

6. Reduce the burden on the Oil companies, as well as the housewife: The FM did just the opposite. He raised duties on Petro-products. Tough times ahead, as any increase in petrol prices lead to an overall inflation. Another thumbs down.

7. Don’t listen to the left: Again, the FM did the opposite. Not a word on reforms. For the past few years, one has become accustomed to hearing a major reforms announcement in the budget. This year, one expected at least labour reforms, but nothing was done.

8. Increase expenditure on sports: The FM increased allocation for sport of Rs 162.01 crores in the budget for the next financial year. But the disappointment was 150 crores for the next commonwealth games preparation, which are to be held in Delhi in 2010. So that leaves only Rs. 12.01 crore for actual sports.

9. Introduce inheritance tax: Didn’t expect it realistically, didn’t happen

10. Please do not mask old schemes as new ones: This is what the FM did last year, and he continues to do the same.

In addition, there were a lot of steps taken in the budget, some very good, others, not so good. Here is my analysis

· Increase in defence spending (Rs. 89000 crore): Unnecessary, especially in view of improving Indo-Pak relations.

· Cut on customs duty on Textiles (from 16 to 8%): A great move, looking to leverage the benefits of NAMA for the textile industry. But unless the issues of labour reform are addressed, will the textile industry be competitive enough?

· Decrease in duties on small cars: Aimed at making India a small car-producing hub. Good initiative, but why limit ourselves to small cars? Why not all kinds of automobiles? We can at least dream big, can’t we?

· Decrease in duties on aerated drinks, condensed milk products, pasta: Unnecessary. These are, by no stretch of imagination, essential commodities. The money generated from these was required. Whom is the FM trying to woo?

· Increased service tax: Simply outrageous. People were expecting service tax to go or drop to 5%, but the FM increased it to 12%. Indirect taxation helps no one. If the service sector needs to be taxed, why not impose the tax directly?

Somewhere, in a poll year, the Finance Minister seems to have lost focus. In trying to please everyone, the FM has pleased no one. The left turn by the finance minister leads the economy nowhere.


Rushikesh said…
Hey Mayank...nice to see you are writting on economics!!!
So dude here are my contribution to your post..
3 new things UPA budget introduced to India
1. GENDER Budget
2. OUTCOME Budget
3. Tax expenditure statment.
Ships said…
I liked your point about automobiles.. We sure can dream big, but atleast I'm glad thr's some sort of initiative form the FM.. one step at a time..

Well... wid so many sects in the ruling party iteself... FM can't please all... Hats off to him for atleast having made an attempt at a fair budget..

And yes, I do agree with ur agriculture taxing funda.. Mebbe it'll strike our govt in a couple of years time...

I too fear inflation... oil price hikes r scary. Yeah, and one more little thing computer enthusiasts (in the sense, can't breathe without a computer types!)like us can rejoice --> no excise duty on combo-drives!! haha...
Vishal Sukheja said…
How can increased spending on Defence be a bad thing? Most of our fleets (both army and navy) are outdated and in serious need for repairs or replacements. Anyways, you donot wait for it to rain beofer you buy an umbrella.
With arm trade diplomacy with France and US at its peak, this was expected.

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