FM sir, What kind of Budget is this?
The middle-class may call this a Maruti-idli-pasta Budget. But political parties seeing it as electoral storm.
By Swaminathan S Anklesaria Aiyar, TNN |
Modest taxes and modest spending increases marked a modest Budget from a normally immodest finance minister. This don���t-rock-the-boat Budget was tailored for the coming state elections.
Finance minister P Chidambaram, on Tuesday, steered clear of controversial reforms ��� some of which had been confidently predicted ��� that might have raised electoral heat.
He did not utter a word about labour reform or raising oil prices in line with the Rangarajan committee���s suggestions. The finance minister did not liberalise foreign investment, announce any new disinvestment, tax withdrawals of long-term savings, or impose any new tax. He increased allocations for every conceivable vote bank, but modestly enough to avoid an explosion of pre-election spending that might swell the fiscal deficit. Relieved by this prudent populism, sensex shot up 88 points.
The Budget had two reform proposals. One was the backdoor entry of the private sector into coal production, by defining captive mining as production by anybody having firm contracts with power, steel or cement producers. The other was the de-reservation of 180 items from the small-scale list. It remains to be seen whether the Left Front will come in the way.
Wooing farmers, the biggest of all vote banks, Mr Chidambaram said farm credit had crossed the target two years running, and he now proposed an interest relief of 2% on old crop loans (at a Budget cost of Rs 1,700 crore). The minister declared he would force public sector banks to give short-term loans at a concessional 7% to farmers (this caused public sector bank stocks to tank on Dalal Street initially).
The finance minister said food processing was the best way forward for farmers, and this sector would henceforth be classified as a priority lending sector by banks. He abolished excise duty on processed foods such as pasta and ice cream, and halved the excise duty on ready-to-eat packaged foods such as idli and dosa mixes. He also cut the excise duty on small cars from 24% to 16%. The middle-class may call this a Maruti-idli-pasta Budget.
No state coming up for elections was left uncovered by finance minister P Chidambaram.
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