Consultant, International Trade
There were expectations that the 7th budget of Pranab Mukherjee might contain progressive development oriented proposals, so that despite political provocations and vagaries, the optimism of progress and growth could have held centre stage. But it has belied that promise, though some eminent Economists called it, a “budget by the Book”.
The GDP growth which was projected at 9%, did not materialize. The GDP growth in 2011-12 was pegged at 6.9% even though the preceding two years showed a healthy growth of 8.4%. Taking a holistic view of the economic changes, GDP growth has been estimated at 7.6%, while the deficit is pegged at 5.1 %(Rs 5,13,590 Cr).
Services account for 59% of the GDP. Its growth also was visible. Yet, the Finance Minister had not thought it fit to provide any relief to the Export sectors which self supporting. Notwithstanding the perils of world trade, Indian exports posted around $300 billion, which is much on the target, and made sizable contribution to the Foreign Reserve Fund. The conventional market of US and Europe has been worst hit by the fiscal teething problems, as such, much of India’s trade was directed at developing countries, new continents, ad new blocs like South America, Latin America, Africa, Asia etc. All that has been provided to improve gaps in infrastructure through Assistance to States for Infrastructure Development for Exports is an outlay of Rs 1300 Cr, even though transaction costs brunt was borne by the exporters themselves. The budget has no commendation to a sector which produced huge returns despite inflation, lack of bank credit, high interest rates, Rupee depreciation, infrastructure constraints, etc. Export of raw materials like Cotton, Rubber, needed a second look, and under no circumstances, their import should be permitted. The imports regime needed a cautious look. Restricting import of edible oil not proportion to the demand, other imports which took a chunk of foreign exchange but gave no supply benefit to the country, etc.
Government wants to restrict subsidies under 2% of the GDP. With strong states, how long the FM can hold to this figure needs to be seen. Service tax, Customs and central Excise taxes have been increased to 12%. This hike of 2% in the services tax and bringing more items under the purview of Service Tax would result in mopping additional revenue to Rs 18,660 Cr(Total: 45,940 Cr), and Customs and central Excise levy will beget Rs 27,280 cr additional revenue. The Government has proposed an income of Rs 70,000 Cr (Rs 30,000 Cr thor’ disinvestment and Rs 40,000 Cr from Spectrum 2 G auction). It is doubtful whether he could achieve this. MGNREGA, flagship programme outlay has been brought down to Rs 33,000 Cr from Rs 40,000 Cr. The Hon’ble Minister for Rural Development says that the funds for MGNREGA was not downsized, as the state governments had a surplus of Rs 6,000 Cr with them, and the funds were allotted to various other Rural schemes. But the cut was 17.5%, and 4.09 Cr households were provided jobs against 5.49 Cr (2011-12).
There is a need to put a cut in the manufacturing capacity of Cars. Firstly, cars clog city roads and subsequently increase oil import bill by slowing traffic all round. Secondly our Roads do not have the capacity to carry more cars as the density has grown three times its capacity.
Kerala sectors like Coconut and Coir were given negligible assistance of Rs 78.19 Cr (Coir) and Rs 87 Cr (for Coconut). These two sectors posted a CAGR of 22% during XI Plan, with exports crossing Rs 1500 Cr in 2011-12. These small yet significant sectors need nourishment and vital support.