The union budget was presented in the parliament on 26 feb 2010 by our honorable finance minister Pranab Mukherji. At this point it becomes important to have an overview of the Indian Economy so that we have a word about what are the basic challenges for the economy and how does the government aims to solve it by its fiscal policies.
The Indian Economy shows a growth rate of 7.2 per cent in 2009-2010. The growth rate can be analyzed as fairly well if we keep in mind the global economic crisis. The high growth rate was possible mainly with the help of various stimulus packages released by the Government Of India for various sectors of the economy. The major contribution in growth has been of the manufacturing sector which showed a growth rate of 18.5 per cent in last December. However, the main concern of the economy is inflation. About 18 per cent inflation rate for food items and a WPI of about 7 per cent has been a major trouble for Indian Economy.
Keeping this status of the Indian Economy, the union budget has been designed to achieve a growth rate of 9 per cent and reducing the fiscal deficit from 6.9 per cent to 5.5 percent. The two contradicting jobs are to be done by keeping another factor in mind that the government has decided to take out its bail out package out from the economy. Such challenging tasks contribute to the tedious nature of the budget. Hence it is left to wonder for the common man that how Pranab Mukherji has dealt with this contradictory situation in a very adroit manner.
India has a wide population with a variety of people of different profession, status, wealth etc. not only the cultural diversity is seen throughout the nation, the nation is also subject to economic diversity. The diverse classes will have a variety of impact on them. The article seeks to evaluate the impact of the same on different sections of the society.
The budget declares the public ownership of the PSU’s by the process of disinvestment, IPOs and divestment. Ownership has been broad based in OIL, NHPC, NTPC and Rural Electrification Corporation while the process is on for National Mineral Development Corporation and Satluj Jal Vidyut Nigam. This will raise about Rs 25,000 crore during the current year. The move will not only bring down the fiscal deficit but also will increase the accountability of such companies and hence bringing down the corruption.
The budget seeks to take India towards a consolidated growth. The Nutrient Based Subsidy policy for fertilizer sector has been approved & become effective from April 1, 2010. It will lead to an increase in agricultural productivity and better returns for the farmers, and overtime reduce the volatility in demand for fertilizer subsidy and contain the subsidy bill. The government has decoded to modify and simplify the foreign reign. It has also decided to set up Financial Stability and Development Council, an apex level council to be set up for maintaining financial stability. Council would monitor macro-prudential supervision of the economy, including the functioning of large financial conglomerates, and address inter regulatory coordination issues. RBI is considering giving some additional banking licenses to private sector players. Non Banking Financial Companies could also be considered, if they meet the RBI’s eligibility criteria. It will also consider recapitalization of the Regional rural Banks (RRBs). This is definitely a good news for those from the financial sector. Like every budget, this budget also brings a special treat for the agriculture sector. The government declared a special package of over 3,75,900 cr only for the agriculture sector. The major announcement was Rs. 400 crores provided to extend the green revolution to the eastern region of the country. The government seeks to develop the agriculture sector and hence solve the supply problems of the economy.
Heavy allocation has been given to the infrastructure sector as well. The government seems to realize the importance of the said sector. The allocation is Rs 1,73,552 cr. provided for infrastructure development. Plan allocation for power sector excluding RGGVY doubled from Rs.2230 crore in 2009-10 to Rs.5,130 crores in 2010-11.“Coal Regulatory Authority” proposed to be set up. Plan outlay for Ministry of New and Renewable Energy increased by 61% from Rs. 620 crore in 2009-10 to Rs.1,000 crore in 2010-11. Solar, small hydro and micro power projects at a cost of about Rs.500 crore to be set up in Ladakh region of Jammu and Kashmir. This is definitely a good step towards development of the infrastructure of the country. Moreover, the heavy allocation made for the environmental issues (like Rs.200 crore provided as a Special Golden Jubilee package for Goa to preserve the natural resources of State, including sea beaches and forest cover, allocation for National Ganga River Basin Authority (NGRBA) doubled in 2010-11 to Rs.500 crore) definitely shows the responsibility of the government towards the environment.
The heavy allotment for education, public health, rural infrastructure, housing, and also for unorganized sector and skill development and for social justice and security shows that the government is well aware of its social responsibilities.
The basic problems lies in the tax structure in the budget this year. The tax system is devised more in favor of the rich than for poor. It will intensify the problem of unequal distribution of wealth in the hands of people. The revised income tax slabs and the revised indirect tax slabs tend to intensify the problem of unequal distribution of wealth. It will also kill people especially when coupled with the problem of inflation in the country. Moreover the hike in the petrol products will worsen the condition. Hence the Finance Minister could have talked the problem in a much better way. The tax reforms could have been handled the issue in a much smarter way so that the excess liquidity in the hands if the people is wiped off and the inflation is taken care of leading to the ultimate result of reduction in unequal distribution of wealth.
The Union Budget 2010-2011 is good for the industrialist, social issues, infrastructure and other sectors but it tends to exaggerate the delicate problem for the common problem. Such problems include that of taxation and also of income distribution and inflation. hence though the budget fails to take care of very basic problem of the common man, it is welcomed by the industrialist, business man and other sections of economy. Hence its evokes a mix reaction of tears and smiles.
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