Our Finance Minister Shri P. Chidambaram is a good Economist. And an equally good politician too. The politician in him showed in the Budget 2008 presented by him. How far it was an Aam Aadmi’s Budget will surely depend on the persons concerned.

Salaried people have reasons to be happy due to the rise in the Income Tax Exemption Limit upto Rs.1,50,000/- thereby raising their take home salary. The Income Tax limit surcharge though, could have been waived off. The Sixth Pay Commission is proposed to announce only a 25% increase in the salaries of the Government servants. A 40% increase in the salaries could have helped. The increase in salaries and take home money would only serve to give a boost to the consumption, in turn driving up the economy that is slowing down slightly.

The commitment by the Government in this Budget to waive loans to farmers is a welcome move, though debatable. He has not provided any relief to the farmers who have borrowed from private money lenders and are at their mercy. Many farmers from Vidharbha have even sold their lands and have no resources to serve themselves. Such grievances of the farmers are largely unaddressed. It is understood that it was a prudent move by the Government to waive of farm loans in order to keep the Opposition in check. The Government had no option either as anyway the loans would have remained in the books as bad loans. Instead of waiving off loans, the Government could have given Grants to the farmers by which the farmers could repay their loans and also take up other activities. Waiving off loans will encourage non repayment of loans in future by even capable farmers who have been repaying the loans all these years. And then by waiving off such loans, no farmer will understand the difference between loans and grants.

However, around Rs.20000 crore has been earmarked for irrigation projects, which will give agriculture a big push.

The Budget proposes better deal for women and senior citizens which are in line with the expectations.

Cars have become cheaper and the Aam Aadmi is not going to benefit from that. This move would only interest the upper middle class and lead to more traffic congestion on the roads.

The increase in tax rates for short term capital gains from 10% to 15% is a brilliant move. Equity is all about long term and if it takes additional tax to coax investors into holding the investment, so be it. And if you insist on trading, pay for it. Every one wins, no one loses.

There is only one line on public sector disinvestment. No radical reforms have been proposed in this Budget.

The target of zero revenue deficit lies nowhere in the picture. Though revenues are not lagging but poor expenditure management is hindering growth. Expenditure should have been on a downward path, instead, they are growing. The exchequer has also committed revenue loss of over Rs.5900 crore in indirect taxes

There is a strong case for boosting defence expenditure even more but the same has not been addressed.

The Finance Minister once claimed that good economics makes for good politics. He also talked of outcomes being more important than outlays. Allocation of Expenditure in health, education and the social sector is not convincing. Shri P.C. Chidambaram could have achieved the same impact by keeping outlays constant and spending decent sums instead on effective monitoring, aided by NGOs and professionals. Between the main flagship schemes, huge outlays are becoming the norm, not outcomes. With the Rashtriya Krishi Vikas Yojana and the National Food Security Mission joining the already long list of flagship programmes like the rural employment guarantee and mid day meal schemes, special outlays for the social sector have cross Rs.100000/- crores. The funds allocated for such schemes are largely unutilised and there is no adequate monitoring as to the effectiveness of such schemes. In both health and education, even the allotted amounts were not fully utilised in the current year while the modest outlay in the social sector was somewhat fulfilled.

The culprit is clearly the inability to achieve economy in spending across the board or in strict prioritisation of government expenditure.

The goodies on offer in this Budget would perhaps rival only those doled out by the Finance Minister himself in 1997-98 in his tax cutting Dream Budget, which remarkable though for the tax reforms turned out to be a fiscal nightmare. Shri P.Chidambaram has moved away from fiscal prudence and discipline. The salary hike with arrears to be announced by the 6th Pay Commission coupled with the cash that the government would be obliged to pay banks for the farmer debt waiver may worsen deficit much beyond the budgeted level.

During the last 4-5 years of his tenure, the economy has grown at a very rapid speed, especially the corporate sector, thus enabling the government to gather revenues far beyond its most optimistic assumptions. But the same cannot be said on the expenditure side. With the subsidies over Rs.1 lakh crores and above, the fiscal deficit will shoot above the Fiscal Responsibility and Budget Management Act. What is concerning is that the revenue front may not be that much rosy this year. The matter of concern are the signs of slowdown and deceleration of exports. However, Chidambaram is optimistic about the India growth story and is hoping that market buoyancy would eventually rectify matters. One only wishes his hopes come true.

This being a pre election year budget one could not realistically expect big ticket changes. If it is P. Chidambaram who rises to present Budget in future under a stable government, rest assured we would be looking at a brand new tax code that replaces the Income Tax Act and much more radical reforms. Till then the double digit growth will remain India’s distant dream.