Wheres The Big Message

Budget 2013-14 plays safe when it should have lifted the national mood

Sure,it couldve been worse.But then again it couldve been better.Yes,finance minister P
Chidambaram had a tough act to perform with Budget 2013-14,fiscally pained as the
government is at a time of slipping growth.Some quarter must be given to the fact hes had to
juggle between trying to woo investors and exhibiting fiscal rectitude,all the while resisting
pressure to be populist in 2014s run-up.Even so,the Budgets sadly no firecracker the kind needed
for toasts to be raised at home and overseas.
The good news first.The fiscal deficit has been contained at 5.2% of GDP for 2012-13.And we
seem on track about meeting targets for 2013-14 and beyond.Hopefully,this will fob off a ratings
downgrade global credit rating agencies are threatening.The bigger worry,the FM said,is the
current account deficit.On that score,hes done well to loudly state that foreign capital inflows are
an imperative.Incentives have accordingly been provided to different types of foreign portfolio
investors.One hopes the government follows up on the promise to simplify rules and procedures
for entry.
The focus on pushing investment,especially in infrastructure,is another plus.Given the private
sectors to shoulder nearly half the amount earmarked for capacity-building,several measures are
rightly geared to boosting infrastructure debt funds,raising loans for firms seeking financing
from the bond market as well as channelling fund flow towards key areas such as
roads,industrial corridors,ports and trade-boosting regional connectivity.
On taxes,the FMs rooted for stability when inflation-hit people wouldve wanted relief.Hes kept
personal income tax slabs and rates unchanged,with just a sop for taxpayers in the Rs 2 lakh to
Rs 5 lakh bracket.On indirect taxes,existing rates of service tax and excise duty continue,with
exceptions.If first-time homebuyers welcome tax breaks accorded them,small taxpayers will
benefit from a modified Rajiv Gandhi Equity Saving Scheme.But,all in all,there are only stingy
giveaways.The minimum exemption limit on income tax,for instance,could surely have been
nudged upwards given price rise has singed household budgets.
Nor is the rationale clear for slapping surcharge on annual taxable income exceeding Rs 1
crore.Mercifully the threshold limit has been kept high,affecting relatively few people.As for
hiked surcharge on firms with taxable income beyond Rs 10 crore,itll provoke grumbling since
business is reeling under high interest rates and input costs.But industry should be happy with
the investment allowance for companies investing over Rs 100 crore in plant and machinery: it
should boost manufacturing.The just-introduced commodities transaction tax,however,will draw
more tears than cheers at a time markets needed enthusing.It was hoped securities transaction tax
(STT) on which some concessions have been given would be junked instead.Shouldnt tax,for
reasons of fairness,be garnered on profits rather than on transactions on which people risk losses
That Rs 9,000 crore will serve as the first tranche of the balance of CSTrelated compensation for
states shows UPA-II means business about GST.This needs applauding.But not much else is said
about reforms needed to realise many other goals.Take the right noises made about spurring
manufacturing,expediting projects and creating jobs.Sure,all of thats necessary.But where are the
clear,timely signals on how industry can leverage economies of scale in the face of difficult
access to land and labour How soon will regulatory hurdles to project execution be removed
While training and aiding employable youth is a good plan,much more must be done to stem
labours casualisation and to create secure organised sector jobs.
Similarly,the government shows welcome resolve on rolling out the direct benefit transfer
scheme,a major pro-poor move.Yet little else is forthcoming on the urgent task of substantially
reducing subsidies the biggest miss in this Budget.Surely the fiscal consolidation plan should
have relied less on fiddling with taxes than on slashing subsidies and other handouts.For
instance,there may arguably be grounds for raising duty on cigarettes.But why the steep duty
hike on cellphones costing over Rs 2,000,in a country where mobile telephonys success has
proved a great social equaliser
The problem with Budget 2013-14 is that its long on growth-oriented rhetoric but short on big-
ticket ideas that slowdown-hit India needs right now.Yes,it could have been worse.Still,the
Budget just about meets peoples expectations,not their aspirations.