This is one of the dangers of the modern media. They will hype a topic way beyond its own capacity and then make the end result look pale and insipid. That is what happened to P. Chidambaram's 2005 effort. A fundamentally decent budget will now forever be compared with what the hype said it could have been. Any budget, at any time, can only be within the constraints of what one can generally get away with. The truth is that we have a very mixed bunch in parliament, where sadly we have allowed an 11 per cent tail to wag the whole body of Indians, and that is the result of our tolerant democracy, our reality. And the sooner we accept this not-too-pleasant thought, the better it will be for our mental being.
This budget has confirmed that the finance minister was operating well within these constraints, also known as coalition politics. But do you know what I think' His leftist friends will still be unhappy (about customs duty reform, about the reduction of corporate income tax, about not raising personal taxation), and I will be very surprised if they do not continue to bark and keep up their threats to bite. And Chidambaram's usual fans, the ones who dreamt with him in 1997 and continue to faithfully do so, will remain despondent.
But let us cut through the budget gobbledygook and draw a good news/bad news matrix and we will know where we are. A major thrust into agriculture is a very clear signal. Without doubt, this is a great effort, a part of the common minimum programme, and widely expected. Also, year after year, the agricultural sector has been showing too much of a swing. Last year agriculture showed a growth of 9 per cent (previous year was negative 5.2 per cent) and this year it clocked a negative 2 per cent, bringing down the gross domestic product by almost 50 percentage points. Chidambaram has done several things in the agriculture sector' higher allocation for rural credit, re-plantation, agriculture infrastructure, higher agricultural credit including micro-farmer credit, higher outlay for irrigation, and so on. All good stuff. A very large thrust, and one hopes that agriculture will show a sharp upswing and deliver a positive 4 per cent growth, which will translate to a change of 6 per cent over the current year, and that will add up to a 1.5 per cent contribution to the GDP. This, together with the thought that all round agricultural development is what will keep this country together, makes the finance minister's effort in this regard so very commendable.
The thrust on education was equally strong. The scholarship schemes, the increase in student loan outlay will pave the way for a better-educated India and an India of a higher intellectual calibre. His efforts towards making Indian Institute of Sciences in Bangalore an institution on a par with Cambridge, Oxford, Harvard and Stanford is highly laudable, but I wonder why Presidency College, that great institution of Calcutta, did not qualify.
His thrust on rural infrastructure, rural housing, electrification, tele-connectivity, micro insurance for rural India, and so on left me a bit cold. It sounded too political, a lot of good words trying to please too many constituents, without actually benefitting any ' because there simply isn't that much to spread around.
Turning to industry, I was very pleased with Chidambaram's thrust on sugar, textile, cement, irrigation and water supply, tea, fertilizer, agricultural implements like tractors and overall infrastructure. The urban thrust made a very nice change and particularly the thought of a special financial city status for Mumbai ' long talked about, but maybe a reality now. These broad-based thrusts will go a long way towards enhancing the canvas of Indian industry and paving its growth.
At this point, he paused, had a large sip of water and talked of subsidies, expectation grew, then he had another sip and talked of FDI in mining, trade and pensions, exhorting fellow parliamentarians to take a pragmatic view. The Chinese, he said, get $ 60 billion as foreign direct investments. Then, a few moments later, he brought up the topic of reform needed in banking space, particularly the co-operative banking sector; the need for widening the tax net, increasing the tax/GDP ratio. Here it comes, I said, the real reform. But then nothing happened. And that is what surprised me ' nothing happened. The need of the hour was to widen the tax net (politically difficult), to do away with a lot of tax exemptions and sops (political suicide), cut away useless subsidies that have become a perennial drain on the exchequer and of no benefit to where the benefit was meant to have gone (politically impossible). But that is where I thought we were going, because if India has to sort out its fiscal imbalance, then we have to deal with it sooner rather than later. Where will his Rs 172,500 crore planned expenditure be met from and his Rs 370,847 crore non-plan expenditure' What happened to disinvestment targets' Not privatization, the Indian communists don't like that word, but selling down 10 per cent to the public' Not a word.
A few questions remain. The corporate tax going down to 30 per cent ' is this not a bit of an optical illusion' The effective tax for a corporate in the current regime was 36.6 per cent. In the new regime, after application of 10 per cent surcharge and 2 per cent cess, it would work out to 33.6 per cent. Hence the difference is only 3 per cent, and before you start cheering, that will get eaten up by the new rates of depreciation and the new highly debatable 'fringe benefit' tax. I suspect that two aspects of taxation will get hotly debated in the days to come. One will be the fringe benefit tax and the other the new funny tax on more than Rs 10,000 drawings from my own bank account. This is so ridiculous that it's not worth discussing. If, for example, I were to draw money from my own bank account to pay my domestic staff every month, or to put in a deposit to a hospital for a medical check-up, then on my own white and accounted-for money, I have to pay a fine for drawing out cash. Something is not right here.
So here I am at the end of a major media hoopla, feeling absolutely exhausted, trying to figure out the direction that this budget has set for me. Some very laudable efforts, no doubt. Given that agriculture might grow at 4-6 per cent, industry is already growing at about 8 per cent and services sector at about 9 per cent, we may well see a GDP growth of a little more than 8 per cent next year, and that would be terrific. But I cannot help thinking that a lot more could have been done. A good balancing act is not exactly what India Inc had expected. Perhaps this budget is more politically expedient and, in the circumstances, appropriate. But after so much had been said would be done, it seems more has been said, and less done.