A Dummy’s Guide To A Populist Budget

“Generous Grants, compassion, righteous rule and succour to the downtrodden are the hallmarks of good governance.”

These words were uttered by the Finance Minister who quoted his muse Saint Tiruvallur while concluding his Budget speech. Well atleast for now on paper we have the UPA government caring for the farmer’s plight with the Rs.60,000 crore debt waiver. It is estimated from 1997-2004 around 25,000 farmers have taken their lives because they were burdened with debt. The move is more than welcome.

The FM announced that the Rajiv Gandhi Grameen Vidyutikaran Yojana will get Rs.5,500 crore which will make it possible for atleast 5,000 villages to get electricity. Good intentions but the implementation needs to be seen.

It is cheaper to buy small cars now as excise duty is cut to 12%. Basic mobile handsets have become marginally costlier with 1% excise levy. Toothpastes, soaps and detergents will be cheaper by 2-3% because of the cut on Cenvat (from16% to 14%). Drug prices will come down due to the excise duty relief.

The Budget has increased the outlay on both education as well as health. The basic exemption is now up by Rs40,000 for men, Rs.35,000 for women and Rs.30,000 for senior citizens. Tax cuts across the board will boost demand and spur economic growth. The FM promises to bring down the fiscal deficit to 2.5% of the GDP next year which is 0.5% off the Fiscal Responsibility and Budget Management Act’s Target and reduce the revenue deficit by 0.5%.

The Markets don’t seem very happy with the Budget. The hike in in short term capital gains tax and the scrapping of rebate on securities transaction tax have hurt local investors. The BSE fell by 246 points on Budget Day and has been showing a downward trend ever since.

The Banking sector will be badly hit. The waiver of farm loans will affect PSU banks in the short run as the reimbursement by Government will be over a period of three years. Banks may have to raise capital or curtail advances to accommodate debt relief.

On the whole, it is a pragmatic budget aimed to please every votebank and set the ball rolling for the coming elections. This Budget gives the Congress the option of going to the elections early.

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