Bangalore International Centre (BIC) had organised an interactive discussion on the Union Budget 2010-11 on 8 th March, 2010 at 5.30 pm. The Panellists were Mr. S Krishnaswamy, Senior Chartered Accountant, Dr. Kala Seetharam Sridhar, Senior Research Fellow, Public Affairs Centre and Prof. K Gayithri, Associate Professor, Centre for Economic Studies and Policy (CESP), ISEC. Prof. S L Rao, Member, Board of Governors, Institute for Social and Economic Change (ISEC) moderated the discussions.
Initiating the discussion, Dr. Kala Sridhar highlighted the challenges faced by the Finance Minister in formulating his budget for the current year. These were: (a) deficits in the aftermath of the financial crisis, (b) the spiralling prices, and (c) the need to sustain economic growth. There was also the question of continuation or modification of the package of Fiscal Stimulus given in earlier years. Her over-all assessment was that the budget proposed by the Finance Minister was both pragmatic and transparent. By and large, the budget took the right approach in increasing the availability of disposable income at the hands of the consumers by reducing the income tax burden. At the same time, the package of fiscal stimulus was modified by restoring the basic duty on crude petroleum, diesel, petrol and other refined products. This was both necessary and desirable. However, increase in central excise duty on diesel and petrol could create inflationary pressures and other problems. Similarly, GST after VAT was perhaps an anomaly. Dr. Sridhar lauded the initiatives towards inclusive development in the budget proposal, particularly in the fields of Rural Development, Urban Development, Women and Child Development and Welfare schemes for the unorganised sector. She was also happy that a National Mission for delivery of Justice and Legal Reforms was being established.
The next speaker, Prof. Gayithri, focussed her talk on the Karnataka budget. She highlighted the fact that despite the economic slow-down there was good aggregate fiscal discipline in Karnataka inasmuch as the tax-GSDP ratio was more than 10 per cent and the fiscal deficits and revenue deficits were more or less as per the FRA stipulations. She however lamented the fact that the emphasis of the government seemed to be overwhelmingly focussed on booking expenditures under different budget-heads and not on actual outcomes. She noted that there was a failure throughout the country, and not only in Karnataka, to measure and monitor outcomes of public expenditure.
Mr. Krishnaswamy, in a lucid and crisp analysis, pointed out that the revised estimates of the Union Budget for 2009-10 showed that the fiscal deficit had jumped up from Rs.4 trillion to Rs.4.14 trillion and the revenue deficit had moved up from 2.82 trillion to Rs.3.29 trillion. For the current year (2010-11) the fiscal deficit is estimated at Rs.2.81 trillion and the revenue deficit at Rs. 2.76 trillion. As a result of these deficits, steps to ensure fiscal consolidation comprising of contraction of non-plan expenditure, increase in non-tax revenue (like disinvestment)and 3 G auction), reduction of Government Debt and ensuring return on capital expenditures had become inevitable. Shri Krishnaswamy stressed that the Finance Minister had done a good job under the circumstances and that his Direct Tax proposals have generally been well-received. On the indirect tax front, the partial roll back of the stimulus package and levy of service tax open new areas were also on expected lines.
In his comments, Prof. S L Rao also commended the fact that the budget was transparent and there were no attempts to fudge the figures or the accounts. He also agreed that the Finance Minister had done his best to balance the budget. He however wondered whether the giveaways on Income Tax and additional levies on indirect taxes could have been postponed or avoided. He noted that no real attempts were made to improve efficiencies in expenditure. Prof. Rao’s prognosis was that the inflationary pressures would not subside till the next crop and that the growth would be better than what is projected. He hoped that. Accountability would be improved with better implementation of the proposed institutional changes.
It was a erudite and well-focussed discussion.