The much-anticipated Interim Budgetturned out to be a perfect non-event for an economy which is showing clear signsof a major slowdown. As a result, markets fell and the benchmark Sensex lost3.42 per cent in the trade during the day.
Markets were expecting some kind ofboost, either through exemptions or enhanced expenditure, to revive the economy. Butthe government decided to maintain a status quo on the revenue side, while therevised estimate of tax collection falls short of budgetary estimates to6,27,949 crore against Rs.6, 87,715 crore.
The total revenue deficit is estimatedto be at 4.4 per cent of GDP instead of 1.0 per cent in the Budgetestimates while the fiscal deficit stands at 6 per cent against the budgetedfigure of 2.5 per cent.
For the fiscal 2009-10, the revenuedeficit and the fiscal deficit are estimated to be at 4 per cent and 5.5 percent of the GDP with major subsidies including food, fertilizer and petroleumestimated to cost Rs.95, 579 crore.
The challenge
The finance minister noted that whenthe major economies are struggling to stay float, a 7.1 per cent growthestimated in the current fiscal still makes India the second fastest growingeconomy in the world. He however also noted that the situation will not remainnormal in the year ahead which means the incoming government will be in adifficult situation in terms of managing growth and deficits. The estimatedfiscal deficit figure of 5.5 per cent of the GDP, economists believe, is boundto overshoot because tax revenue will also see significant pressure, signs ofwhich are already visible.
Small Steps
The government plans to spend of Rs.40,900 crore on the Bharat Nirman which has six components namely, rural roads,telephony, irrigation, drinking water supply, housing and electrification.
National Rural Employment GuaranteeScheme, which now being extended to all districts will have the allocation ofRs.30, 100 crore.
Under Jawaharlal National Urban RenewalMission, which focuses on improving urban infrastructure, 386 projects amountingto Rs.39, 000 crore have been sanctioned as of December 31. Rs11, 842 croreallocated for the year 2009-10.
The government also plans to infusecapital and recapitalise the public sector banks Capital to Risk Weighted AssetsRatio (CRAR) of 12 per cent
For now, it has been left for the nextgovernment, but the compelling question to be asked is: Can the Indian economyafford to wait for 4 months before its gets some stimulus from the government? Inthe meanwhile, economists will also find themselves surrounded by questions onwhat can be done to revive demand where the deficits are already mounting andrevenue is slowing.
