I love the way how the entire country and its citizens are perpetually obsessed by numbers. It doesn’t limit itself to financial and economic arena, though. Just look at how we are so engulfed in questions like how many centuries has Sachin Tendulkar scored and how many thousand runs he has passed and how many test matches he has played etc. At the end of the day, in the moment of truth when we need to win the match, those numbers rarely bail us out.
Quite similar is this year’s Budget. Keeping in mind the elections and yes, the people who vote in elections, the Finance Minister has cleverly and shrewdly provided us a secret gift in a shiny wrapping paper.
What also had to be kept in mind is the slowdown in global markets due to increased fears of US recession, an impact which could directly have in the growing Indian economy. Plus, those fears that the India’s honeymoon with the GDP growth rate was ending. Such slowdown, if true, would be devastating, when the funds riding on the stock markets are primarily of the FII’s, reaping in the benefit.
This post would hardly help the academics or the people preparing for interviews for B schools. What we say there (and I am included too) is what we want to believe and what we want to achieve, NOT what we think is going to happen. Call me cynical, a forbearer of bad news or someone who secretly wishes for doom, but all does not look too well. What the minister did was to tweak a thing or too, which would probably keep the growth rate in Indian economy still at an impressive rate in the next year, enough for his government to get re-elected. As some one sarcastically put it, “The only thing not announced in the budget were the election dates”
To explain things simply, individuals were given a breather with reductions, and other concessions, (One already knows all the numbers). Increasing the disposable income means more buying, more consumption (thereby inducing more production and the Govt coming up with reduced interest rates) with more investment thereby boosting growth in the GDP. Along with this, the budget proposes to increase government expenditure to an all time high with numbers no one had ever dreamt of to increase India’s GDP with a long term intention along with a short term objective to attract all the potential voters and potential Investors.
People, who look at numbers and believe them, would be satisfied at them when they do come out next year. And professional individuals, right now, are also very happy because they think that a high disposable income would increase their ability to buy more. What they will not understand, is that only disposable income increases while goods bought (and necessary ones, those) will not get any cheaper. Inflation will increase, due to increase in money flows, so you pay more than what you are paying now. And you live in an illusion that you have more money now. Measures to check inflation, although, have been conveniently left out in the budget.
The most important question, that everyone is asking right now, is how will the Government arrange for 60,000 crores? That’s not that difficult to explain. The process of loan waivers is a 3 years process, as said by the Finance minister. We only see tax sops to individuals. Corporate tax, on the other hand is a different story. There are stringent rules applied and corporates don’t get any relief. Government hunts down its revenues from here, definitely more than that of individuals.
This budget is actually again a plan suggesting the measures. Implementation is easier said than done. For example, since India still has a deficit in its balance of payments, the loan waiver and other government expenditure has given something to think about. It doesn’t matter if the government is re-elected or not, taxes are bound to increase for the corporate sector next year. Such increase would again cause to look for more SEZs and again the SEZ policy has also been conveniently hidden underneath the carpet, even though Nandigram and Singur were such burning issues this year.
But I do place my facts on the probability that the measures that the government has proposed will be implemented. The building of IITs and IIScs and 16 central universities are still in papers and such “mandatory” announcements are made every year. Evaluation is not done, and the only effects proposed would be short term effects. The numbers, the growth rate, the inflation rate and the tax rate are huge matters which are always applied with a short-term intention, while the consequences are not given any importance.
If the annual financial budget is only created to keep the investor’s confidence, the voter’s confidence and the confidence that India is growing, by whatever measures necessary then what is the need for such annual disclosure? The government and the finance minister can come out every time with their policies when there is an issue at hand, like global markets or economic recession.
Growth is a concept which is never short term. The problem is that foreign investors look for immediate results, through the growth rates. Immediate results can always be arrived at by applying tweaks like increase/decrease in taxes. But in this process, the whole point of the growth of Indian economy in real terms, is absolutely lost.
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