Budget 2008-straight from the heart

So let us look first at the some of the pluses.

First and foremost, a recognition that food security and improved farm incomes is central to our growth and social cohesiveness. The emphasis on agriculture is welcome. So is the emphasis on irrigation, optimum inter basis water use, research and development, and allied activities like horticulture. One hopes that these do get implemented.

Second, recognising the advantages of demographic differentials and social tensions from rising unemployment, the priority in extending the access to educational opportunities at multiple levels with skill inculcation as well as vocational training, is timely. Nonetheless, the policy reforms on education remain unaddressed, like incentivising private investment in education, encouraging competition and more importantly fully implementing the recommendations of the Knowledge Commission.

Third, calibrating the tax rates has been sensible. The marginal reduction in excise apart from giving fillip to the manufacturing sector will help align the roadmap for a GST in 2010. Raising the slab for income tax exemption is appropriate but should now be inflation indexed. The corporate tax, particularly the realised rate, is modest and needed no break. The withdrawal of the transaction tax is sensible. There is a case for elimination of the Fringe Benefit Tax. What is however disappointing is that surcharges and cesses have been continued when tax buoyancy afforded an opportunity for their elimination.

Fourth, designing a system for monitoring outlay outcomes as well as fiscal and qualitative evaluation of pubic outlays is logical. Capacity building, particularly in States which would implement investment, would be important. To start with:

8226; Moving forward on statistical system upgrades to improve the monitoring of the economy

8226; Development information management: paying attention to the decrepit statistical and management information system MIS at all levels of government, but especially state and local

8226; Well-thought out e-governance strategies.

Among the clear negatives are:

8226; No sensible person can support a loan waiver of Rs 60,000 crore. Even looking at farmers8217; indebtedness, there could have been other ways like moratorium, long-term re-schedulement, and asking banks to re-lend without repayment. Reintroducing the forgotten culture of loan melas and waivers at a time when we are seeking to align our banking practice to the best international practice is a major setback. This has broader implications for other sectors like power, water supply and pubic utilities.

8226; The Economic Survey may as well have not been presented.

Not one word from the difficult reform agenda called Policy Options finds even a sneaking mention in the budget.

8226; None of the complex issues of more transparent fiscal accounting, reckoning the huge off balance-sheet liabilities, subsidy rationalisation are sought to be addressed. Leaving them to the XIIIth Finance Commission is passing the buck to successors. Obviously the Prime Minister8217;s repeated reference to many of these issues have made no difference.

8226; Finally issues of regional divides, growing inter regional differences and enhanced poverty entitlements referred to in the Economic Survey find either no mention or remain inadequately addressed.

In conclusion one is reminded of what Keynes said 8220;the day is not far off when the economic problem will take the back seat where it belongs and the arena of the head and heart will be occupied by our real problems 8212; the problems of life, of human relations, of creation, of behaviour and of religion8221;.

One cannot always be ruled by the head. Budget 2008 is straight from the heart.