81 Tests, 2019 Articles
and counting ...

Budget '13-14 : It's Good' Ol Substance Over Style

FEBRUARY 28, 2013

  submit to reddit   Delicious   Digg   LinkedIn  





It's a rare budget that seeks to win votes not on tax breaks and freebies, but by accelerating growth and taming inflation through fiscal prudence. While trying to achieve these goals, Chidambaram has relied on good economics being good politics too, which is quite bold.




Against a growth of 13.4%, he hopes the tax collections to rise by 19%, an optimistic estimate. He has proposed no new taxes. Only a temporary surcharge of 10% on super-rich individuals and corporates for just one year, which goes well with his promise of tax stability.



Chidambaram's not-so-obvious promise is that he will be able to tame the high inflation plaguing the economy for 3 years now. Of course, the risk of a credit rating downgrade by global agencies still remains. Were this to happen, this would imply an outflow of billions of dollars, making the dollar rise to may be 60 against the rupee and also the imports costlier. That would propel inflation to 15%, thereby inflicting a crushing electoral defeat on the UPA. But his budget has saved it from any such possibility.


It should strengthen the rupee and exert a downward pressure on import prices. The resulting fall in inflation should then lead to lower interest rates, sparking fresh investment and reducing EMIs.



But it needs to be remembered that a budget is just that – a part of the framework for improving the prevailing investment climate and growth. Much, much more is required needed to cut the red tape, accelerate clearances and improve governance. This Budget may lack any attractive election slogans or populist gimmickry, but it aims at concrete results in the form of faster GDP growth and lower inflation. Success on these fronts should win it votes at the elections next time. It is a less dramatic and a more un-showmanly approach than a blanket farm loan waiver, but it could be at least as effective as the waiver was.



Tell Us About gkmine.com

We Listen ...

Fortnightly Contest

... WIN Exciting Prizes ...

item-pointer Coming Soon ...

... Previous Winners ...