A Pragmatic and Balanced Budget

DSIJ Intelligence / 16 Mar 2012

Without resorting to emphasis on populist measures, the FM has proposed to contain the subsidy burden to 2% GDP from 2.5% in 2011-12 and further reduce to 1.7% in 3 years time.

Against the backdrop of looming political uncertainty, the  eurozone crisis and slowdown in the world-wide economic growth, the Finance Minister has endeavoured to present a balanced and reassuring Budget 2012-13.

Without resorting to emphasis on populist measures, the FM has proposed to contain the subsidy burden to 2% GDP from 2.5% in 2011-12 and further reduce to 1.7% in 3 years time. The administration of subsidies is to be reformed. The intent of adhering to fiscal discipline to tame inflation and strike a healthy trade-off between growth and equity is clear.  The reduction of fiscal deficit from 5.9% to 5.1% and a new FRBM framework will help the government achieve fiscal consolidation in the medium term. This will lead to a more liberal monetary policy and rising investment.

There are positives for the capital market:

  • Reduction in the STT
  • The proposed Rajiv Gandhi Equity Savings Scheme to boost retail investors participation
  • Divestment of government stake in PSUs
  • Permission for QFIs in debt
Higher allocation of funds for infrastructure and duty exemptions for thermal power companies, coal and LNG will bridge the gap in infrastructure needs to cater to the needs of the manufacturing industry and enhance job opportunities.

Agriculture infrastructure has received top priority through viability gap funding schemes to support public-private-partnership and setting up of government owned Irrigation and Water Resources Finance Company.

SP Hinduja, 
Chairman - Hinduja Group