Budget 2012: Economists seek a 'policy' budget

NEW DELHI: Concerned over slow economic growth and waning confidence of both domestic and international investors, economists in their pre-budget meeting with the Finance Minister urged to make this budget a policy budget rather than only a statement of account.

They said that budget should be used as an instrument for restoring the confidence of the investors, said a finance ministry official. Finance Minister Pranab Mukherjee said that the government is hopeful that by the end of March, the head on inflation would be between 6 and 7% while the growth rate may be around 7% plus.

"The current year was a challenging year as we had to face the problem of inflation, fiscal deficit and maintenance of sustainable and inclusive growth," he said. Among other reform measures, economist suggested were to put on fast track mega infrastructure projects, and expenditure on populist measures be reduced and the leakage of funds in implementing them be curbed.

"Budget has to make a strong policy statement. Show the world that government is serious on fiscal consolidation and fiscal deficit will be reduced," Rajiv Kumar, Secretary General of FICCI said after the pre-Budget meeting.

Other suggestions included decontrol of diesel, higher excise duty on diesel cars and use of cash transfer system to distribute subsidies directly to the beneficiaries among others.

Prime Minister's Economic Advisory panel member M Govinda Rao said the deficit in the current financial could overshoot the target 1% to around 5.6% of the GDP.

"If fiscal deficit slippage is 1%, next year if you want to bring it down to 4.1%, there is going to be a huge problem," he said. The government had projected the fiscal deficit to fall to 4.6%of the GDP in 2011-12 as against 4.7% in the earlier fiscal.

Other suggestions to improve growth and restore confidence included abolishment of Security Transaction Tax, reforms in tax administration system, and giving infrastructure status to aviation sector and township housing among others.