To be or not to be? A see-saw battle between growth, electionsNew Delhi, Feb 15 (UNI) The Interim Budget to be presented tomorrow in the Lok Sabha by acting Finance Minister Pranab Mukherjee is expected to have continued focus on growth to ward off the impact of the global slowdown, lacking, by and large, the glow of a pre-election bonanza, while ensuring that the effect of the unsavoury economic developments minimally impact the vulnerable sections of society.
Contrary to the widespread public perception that this being the last Budget ahead of the General Elections, now just a few months away, not to speak of the roaring optimism in the Congress corridors, it may not be a purely vote-catching affair, highly-placed sources said.
The sources said the entire exercise has been worked out keeping in mind the need to give a boost to areas which have better employment generation potential and which are geared towards improving the lot of the rural population.
Sectors, which have high employment potential, and others, which are of a high capital intensive nature, have already been identified and given a thrust in the two stimulus packages announced by the government. These are the sectors which would be given an enhanced allocation, while other sectors irrespective of their import or relevance, may find their allocation at the same level as last year, the sources said.
This may have incurred the wrath of the political heavyweights who man these Ministeries, but a government, led by economists, has found it difficult to ignore the economic logic and compulsions of the difficult situation staring in the face of the nation, not to mention the global community.
The sources in this regard cite the instance of health and education, which may find their allocations at standstill level.
The major gainers in the Budget exercise would be the much-hyped and now publicised (the compelling logic of elections in a loud democracy like India) which are also the cardinal subjects of the National Common Minimum Programme (NCMP) like the National Rural Employment Guarantee Scheme which are slated for the lion's share among the enhanced allocations.
The Ministry of Rural Development is likely to see an allocation of about Rs 55,150 crore, up from the current level of Rs 38,500 crore.
The flagship programmes of the UPA government, which were also the beneficiaries of stimulus packages, collectively are likely to get an amount of Rs 1,23,000 crore -- a hefty hike of more than 36 per cent as compared to the allocation last fiscal.
It is increasingly becoming clear that the government would stick to its earlier pronouncement on not going in for a third stimulus package this fiscal, while cleverly building it in the Budget itself.
All critical sectors of the economy which have already been allocated additional funds would continue to draw more monies in the Interim Budget, too,
Despite the slowdown and a poor performance on the excise front resulting from the downslide of the manufacturing sector, government revenues are set to grow by 15 per cent.
Now consider the logic of the policymakers. Flagship programmes, including NREGA, by benefiting the poor would generate additional incomes in their hands. The poorer sections have a higher propensity to consume, would by generating additional consumption and incomes would have a multiplier effect on the National Income and production. This is good old Keynesianism at work in a depressed economy.
Its added appeal in a country like India is that it would also bridge the rich-poor gap, which is a source of embarrassment in a rapidly growing economy like India. The economy, now poised to grow at seven per cent this fiscal, despite the backlash of the global meltdown, would still be the second fastest in the global system, whose growth is projected at 0.5 per cent in 2008-09, a virtual static position.
In India, the gap between the rich and the poor is indeed stark with a hopeless record on Human Development Indices, the Budget intentionally or as an unintended consequence, would end up bridging this historical injustice to the vast masses, whose condition leaves much to be desired.
The economists in the government--and most know who they are—do not want any obstacle in the efforts to counter the slowdown. The Budget is likely to see direct incentives for sectors where sickness needs to be checked.
As part of this strategy, the Budget is likely to witness an increased allocation to the Ministry of Heavy Industries for tackling the problem of sick or not-so-sick PSUs. The funds for restructuring of PSUs would be in the vicinity of Rs 3,200 crore.
Agriculture and animal husbandry are likely to witness a major hike in their allocation up from Rs 1,760 crore to Rs 6,900 crore.
However, urban transport may see a fall in its allocation from Rs 2,870 crore in the current year to Rs 1,560 crore in 2009-10. Another loser in this game of losers and winners or snakes and ladders, as some call it, is expected to be Housing and Urban Development Corporation (HUDCO), whose allocation may go down by as much as Rs 1,000 crore.
The Ministries, whose allocations are expected to be at the same level as last year, are those relating to Minority Affairs, Textiles and Tourism.
Surprisingly, the allocation on skill development is expected to go down from Rs 300 crore to Rs 50 crore.
The new year will see the introduction of Unique Identification Cards with the Budget allocating a sizeable amount for this purpose. There is likely to be a continued thrust on exports and infrastructure, the first a victim of the global meltdown and the second a necessity to ward it off.
Sources say a unique feature of the Interim Budget will be measures of a sustainable nature to prepare the economy for the exigencies of the global economy going further down the drain.
The last Budget of the UPA government comes at a time when the world economy is facing its most difficult times ever since the Great Depression of the 1930s. The Chief architect of the revival of the Western economies was the wizard of the century, Lord J M Keynes, a multi-faceted personality who left his mark on history. So powerful was the logic of his theory that countries today again in a similar situation resort to his wisdom.
But the Budget also comes at a time when the General Elections are knocking on the doors. In a democracy like India, the logic of elections can never be ignored, for survival comes first and everything else later.
But unlike the Railway's Vote-on- Account, Lalu's populist train moved faster. Perhaps, that was always the case for the General Budgets have been different.
The most interesting dimension of the Interim Budget will be to see how it does the balancing act. Mr Pranab Mukherjee is known to be a seasoned politican, a dexterous person and also an old hand at economic management. His skills will be on test once again tomorrow.
GENERAL BUDGET
Def. spending up 34%, hike in flagship programme to woo masses
New Delhi , Feb 16 (UNI) In a clearly election oriented strategy, the Interim Budget 2009-10 today hiked Defence spending by an unprecedented 34 per cent to Rs 1,41,703 crore and enhanced allocations to flagship programmes.
However, no new stimulus package or changes in the tax structure were announced in the Budget presented by Finance Minister Pranab Mukherjee in the Lok Sabha.
The Budget saw nearly 15 per cent of the total spend of Rs 9,53,231 crores being allocated to the Defence sector. The message that the government intended to give to the people was that the security of the nation is the prime concern in the wake of terror strikes like the recent Mumbai attacks.
Observers say this could take the sting out of the BJP election plank that the government was soft on terrorism that was the most formidable threat to the country.
While there was hardly any announcement of new programmes, the allocation to certain key Flagship Programmes as well as those outlined in the National Common Minimum Programme (NCMP) has been enhanced, with a view to woo the rural masses. For instance, spending on National Rural Employment Guarantee Scheme (NREGS) was given a major hike as also the allocation to agriculture.
The only two new schemes that found a place in the Budget were Indira Gandhi National Widow Pension and Indira Gandhi National Disability Pension Scheme.
A key highlight of Mr Mukherjee's speech was an extension of interest subsidies to debt-hit farmers, one of the first measures in the Budget.
He also announced that the India Infrastructure Finance Company will raise Rs 10,000 crore from the market by end of March 2009. India Infrastructure Finance Company will finance 60 per cent of commercial loans in private public partnership in critical projects, he said. The organisation is to raise Rs 30,000 crore from the market in the next fiscal year.
The Finance Minister refrained from tinkering with tax and duty rates in the Budget and increased by a huge allocation of Rs 30,100 crore to government's flagship rural employment programme and many other schemes in a bid which would also help counter the economic slowdown.
Mr Mukherjee projected a smaller budget deficit next year, leaving to the next government that may be voted in by May to decide on another stimulus package.
The budget shortfall will narrow to 5.5 per cent of gross domestic product by March 31, 2010 from an estimated 6 per cent in the current fiscal year, Mr Mukherjee said.
He said the new government will have to increase spending by as much as one per cent of GDP to protect Indian economy from a global recession that may continue through the year.
Justifying the status quo on the tax structure, Mr Mukherjee said ‘’constitutional propriety’’ demanded the government did not announce new tax rates or policies in the Budget.
The statement was aimed at obtaining Parliament’s approval for spending in the first four months of the next fiscal year.
Projecting a GDP growth rate of 7.1 per cent for 2008-09, Mr Mukherjee indicated a much higher level of fiscal deficit of 6 per cent of the GDP.
The below the line fiscal deficit would be of the magnitude of 1.5 per cent of the GDP, taking the total deficit to 7.5 per cent of GDP.
The Budget did not meet either the approval of the industry nor the stock markets, or the political parties for that matter.
The opposition charged that the measures would not get the economy out of the slowdown phase. Mr Mukherjee has lost a critical opportunity to take the economy out of the morass that it finds itself in they said.
The Budget was aimed at political gains in view of the General Election just a few months from now they added.
Industry saw a policy paralysis for the next few months, the only move possible being in the realm of monetary policy.
The benchmark Sensitive index plummeted 3.4 per cent to 9305.45 on the Bombay Stock Exchange as the players felt that the government had announced no new incentives to address the problems of sagging sectors.
Taking into account of vows of export community, the government extended interest subvention of two per cent for the entire year.
The slowdown has impacted on the government's revenue with tax collection being projected lower by Rs 60,000 crore than the Budget Estimates.
Through the Interim Budget, the government seeks to obtain a sanction from Parliament to incur expenditure in the months before the new government comes to power. The Budget for the full financial year starting from April 1, 2009 will be presented once the new government is elected.
The increased spending necessitated by the two stimulus package and large subsidy pay outs will have to be funded through borrowings. Credit rating agencies have warned that a rise in the deficit would lead to rating downgrades and deter investors from buying Indian debt.
Mr Mukherjee said there was need to accelerate reforms, mostly in the financial system to get back to the nine per cent sustainable economic growth. This was a mere exhortion, devoid of any concrete action.
Reiterating that there will no new fiscal stimulus package for the current fiscal, the government, however, gave an assurance that it will act as and when required to give a push to the economy.
The government said that it has sought 4.2 billion dollars additional assistance from the World Bank, of which three billion dollars would be for recapitalisation of Public Sector Banks.
The fund from the World Bank for recapitalisation of banks will have its play in the next two years and beyond to assure that their CRAR does not fall below ten per cent.
Officials said the government would raise Rs 45,000 crore in consultation with the Reserve Bank of India to fund enhanced government expenditure. This would not be in the nature of market borrowings, but its mode was being worked out.
The assistance of 4.2 billion dollars from The World Bank is intended to be used for the fiscal 2009-10 and the monies can be spent in the subsequent years.
The package from the World Bank has been necessitated to ward off the negative impact on the Indian economy of the global slowdown.
Observers say a confident Congress-led government riding high on the recent State-election results, choose to play safe in the Interim Budget. The last public pronouncement on its financial strategy was merely intended at creating another pro-'aam addmi' slogan that would help it draw public sentiments in their favour.
They said the fact that Mr Mukherjee chose to link defence spending with the Mumbai attacks clearly meant that the UPA Government would go to the masses saying the government's prime concern was social and defence security, perhaps more than economic liberalisation.
Political pundits say the master stroke of the budget exercise is that Mr Mukherjee kept tax incentives out. By doing so while the government may have temporarily displeased the industry, but it will provoke the media to talk just about its pro- rural development strategy and the security imperatives.
Dichotomically, Railway Minister Lalu Prasad, who is the unquestioned leader of the RJD and a coalition partner, did not follow the same strategy. The pundits say Mr Prasad is not as comfortable as Congress in getting a fresh mandate, facing tough competition from his rival Nitish Kumar, who seemingly has transformed Bihar.
The shrewdness of the economist-led government lies in the fact that Flagship Programme got a major boost as much as for reasons of equity as part of the stimulus package. Not without reason, Mr Mukherjee ended his speech by saying that he had no doubt that when the time comes, people will recognise the ''hand that steered the country through difficult time and made 'Aam Admi' as the focus of the development process.''
RAILWAY BUDGET
A populist Interim budget slashes fares 2%; 43 new trains & more
New Delhi, Feb 13 (UNI) With General Elections around the corner, Lalu's populist train moved faster, slashing passenger fares by two per cent almost across the board, imposing no new freight charges, launching 43 new trains and extending another 14 in the Interim Railway Budget presented today in the Lok Sabha.
A fast-growing and modern India is to see more bullet trains like in Europe and work to commence soon on the Eastern Dedicated Freight Corridor (DFC).
Typical of his style, Railway Minister Lalu Prasad's hour-long speech was sprinkled with wit and humour as it laid to rest the speculation whether an interim budget can bring about any new proposals. In a way, it had the makings of a full-fledged budget, which gave an opportunity to the Opposition to lambast the Railway Minister for presenting a "directionless budget which was neither full nor an half, but a vote budget."
In a please-all affair, Lalu brought about a two per cent reduction in fares for tickets costing more than Rs 50, including second class and sleeper class tariffs of all Mail, Express and ordinary trains.
Fares of all AC first class, AC-II and III tiers and AC Chair Car have also been reduced by two per cent, apparently to ward off the threat of competition from low-cost airlines.
To pander to the common man, the Minister announced reduction in fares of ordinary passenger trains by Re one, for fares upto Rs 50 for a journey more than ten kilometres.
The last budget of the UPA government also saw the announcement of several measures to improve passenger amenities, but surprisingly nothing for the elderly or the disabled as well as no further moves towards creating infrastructure for the 2010 Commonwealth Games.
The 'turnaround guru' who now has many admirers in the West, projected a cash surplus before dividend at Rs 19,320 crores.
While the stock market gave a thumbs up paradoxically to the election-oriented budget, lifting the sombre mood of the Bombay Stock Exchange by a stupendous 168 points rise, captains of industry were critical that an opportunity has been missed of bringing down freight rates to help the business community tide over the morass it finds itself in because of global economic meltdown.
The plan outlay has been pegged at Rs 37,905 crores, but the implementation of the Sixth Pay Commission Report by the Public Sector behemoth will see Railways bearing an additional burden of Rs 13,500 crores, increasing the operating ratio to 88.3 per cent, a figure much higher than that of last year.
The reduction in fares will cost the Railways a whopping Rs 700 crores.
In defence of the budget, officials said the vote-on-account of the Railway Ministry has a lot for everybody and an impetus formall-round growth.
They said as per the practice, the vote on account does not have major policy pronouncements as a full-fledged budgetary exercise will be undertaken by the new Government in July.
The budget raised hopes that another fiscal stimulus package is on the offing in the Interim General Budget on Monday, which may include tax rate cuts.
In the customary press conference after the presentation of the budget, Mr Prasad put up a stout defence saying that the reduction in fares was not with an eye on elections, but in line with what he has done in his five past budgets.
He also denied the charge that the budget was Bihar-centric as what had sought to be been done was only a correcton of the historic mistake of ignoring his backward State.
Unfortunately for Mr Prasad, the presentation of the rail budget in the Rajya Sabha was marked by noisy scenes and slogan-shouting as an aghast BJP chose to highlight the issue of former Finance Minister Yashwant Sinha being attacked in Jharkhand.
The proposals entail starting a Bullet train service between Delhi and Patna. A pre-feasibility study of the project is to be carried out in the near future.
This would be in addition to the bullet train projects already announced between Delhi-Amritsar, Ahmedabad-Mumbai-Pune, Hyderabad-Vijayawada-Chennai, Chennai-Bangalore-Ernakulam and Howrah-Haldia.
The Minister said after commencement of the work on Eastern Dedicated Freight Corridor (DFC) near Dehri-on-Sone earlier this month, work on the Western DFC will begin this month itself.
After the launch of the first train service in the Kashmir valley recently between Anantnag and Rajwansher, another service is to be started between Baramullah and Qazigund.
The 43 new trains, which include four 'Garib Raths,' pertain to all parts of the country. These include Secunderabad-Manuguru Superfast (Daily) Mumbai-Karwar Superfast (Tri-weekly), Bhopal-Lucknow Junction Garib Rath Express (Weekly), Ajmer-Bhagalpur via Delhi Garib Rath Express (Bi-Weekly), Nizamuddin-Bangalore via Kacheguda Rajdhani Express (Tri-weekly) Barauni-Delhi Jan Sadharan Superfast (Bi-weekly) Mumbai-Varanasi Superfast (Daily), Mysore-Yesvantpur Express (Daily) Jamalpur-Gaya Passenger Korapur-Rourkela Express via Rayagada (Daily) Agra-Ajmer Superfast (Daily) Sitamarhi-Patna Link Service (Daily) Tiruchchirapalli-Madurai Express (Daily) Mumbai-Bikaner Superfast (Bi-weekly) Agra-Lucknow Junction Shatabdi Express (Daily) Gandhidham-Kolkata Superfast (Weekly) New Delhi-Guwahati Rajdhani Express via Bhagalpur (Weekly) Howrah-Delhi Link Service via Azimganj-Bhagalpur (Weekly) Sitamarhi-Delhi Garib Rath Express via Patna (Weekly) Ranchi-Patna Jan Shatabdi (Daily) Jhansi-Chhindwara Superfast (Bi-weekly) NewDelhi-Guwahati Rajdhani Express via Muzaffarpur (Weekly) Varanasi-Jammu Tawi Superfast (Daily) Gwalior-Bhopal Intercity Express via Guna (5 days a week) Howrah-Haridwar Superfast (5 days a week) Jammu Tawi-Darbhanga Garib Rath Express (Weekly) Mumbai-Jodhpur Express (Weekly).
The trains whose extensions were announced include
5761/5762 Ranchi - Alipurduar Express to Guwahati, 9269/9270 Porbandar - Bapudham Motihari Express to Muzaffarpur, 1471/1472 Jabalpur - Bhopal Express to Laxmibai Nagar, Indore, 6865/6866 Ernakulam - Tiruchchirapalli Express to Nagore 3155/3156 Kolkata - Darbhanga Mithilanchal Express to Sitamarhi and 2175/2176 Howrah - Gwalior Chambal Express to Mathura.
Frequency of certain trains was also announced. These include
2423/2424 New Delhi - Guwahati/Dibrugarh Rajdhani Express from five days to six days. 2443/2444 Bhubaneshwar - New Delhi Rajdhani Express from two days to four days, 2211/2212 Nizamuddin – Bapudham Motihari - Garib Rath from weekly to Bi-weekly, 7091/7092 Secunderabad - Patna Express from Bi-weekly to Daily, 2111/2112
Amravati - Mumbai Amravati Express from Tri-weekly to Daily and 2957/2958 Ahmedabad - New Delhi Rajdhani Express from six days to Daily.
There is also a proposal to construct nine Railway Overbridges and Under Bridges during the year.
The Minister delved at length on the achievements of the Railways during the tenure of the UPA government, one of these being significant reduction in rail accidents from 325 in 2003-4 to 194 last year.
Typical of his style, Mr Prasad's speech was peppered with some Urdu and Hindi couplets, as well as rustic remarks and had a befitting ending, with the Minister saying that the UPA government was leaving the public sector behemoth on a ''rock solid foundation.''
Contrary to the widespread public perception that this being the last Budget ahead of the General Elections, now just a few months away, not to speak of the roaring optimism in the Congress corridors, it may not be a purely vote-catching affair, highly-placed sources said.
The sources said the entire exercise has been worked out keeping in mind the need to give a boost to areas which have better employment generation potential and which are geared towards improving the lot of the rural population.
Sectors, which have high employment potential, and others, which are of a high capital intensive nature, have already been identified and given a thrust in the two stimulus packages announced by the government. These are the sectors which would be given an enhanced allocation, while other sectors irrespective of their import or relevance, may find their allocation at the same level as last year, the sources said.
This may have incurred the wrath of the political heavyweights who man these Ministeries, but a government, led by economists, has found it difficult to ignore the economic logic and compulsions of the difficult situation staring in the face of the nation, not to mention the global community.
The sources in this regard cite the instance of health and education, which may find their allocations at standstill level.
The major gainers in the Budget exercise would be the much-hyped and now publicised (the compelling logic of elections in a loud democracy like India) which are also the cardinal subjects of the National Common Minimum Programme (NCMP) like the National Rural Employment Guarantee Scheme which are slated for the lion's share among the enhanced allocations.
The Ministry of Rural Development is likely to see an allocation of about Rs 55,150 crore, up from the current level of Rs 38,500 crore.
The flagship programmes of the UPA government, which were also the beneficiaries of stimulus packages, collectively are likely to get an amount of Rs 1,23,000 crore -- a hefty hike of more than 36 per cent as compared to the allocation last fiscal.
It is increasingly becoming clear that the government would stick to its earlier pronouncement on not going in for a third stimulus package this fiscal, while cleverly building it in the Budget itself.
All critical sectors of the economy which have already been allocated additional funds would continue to draw more monies in the Interim Budget, too,
Despite the slowdown and a poor performance on the excise front resulting from the downslide of the manufacturing sector, government revenues are set to grow by 15 per cent.
Now consider the logic of the policymakers. Flagship programmes, including NREGA, by benefiting the poor would generate additional incomes in their hands. The poorer sections have a higher propensity to consume, would by generating additional consumption and incomes would have a multiplier effect on the National Income and production. This is good old Keynesianism at work in a depressed economy.
Its added appeal in a country like India is that it would also bridge the rich-poor gap, which is a source of embarrassment in a rapidly growing economy like India. The economy, now poised to grow at seven per cent this fiscal, despite the backlash of the global meltdown, would still be the second fastest in the global system, whose growth is projected at 0.5 per cent in 2008-09, a virtual static position.
In India, the gap between the rich and the poor is indeed stark with a hopeless record on Human Development Indices, the Budget intentionally or as an unintended consequence, would end up bridging this historical injustice to the vast masses, whose condition leaves much to be desired.
The economists in the government--and most know who they are—do not want any obstacle in the efforts to counter the slowdown. The Budget is likely to see direct incentives for sectors where sickness needs to be checked.
As part of this strategy, the Budget is likely to witness an increased allocation to the Ministry of Heavy Industries for tackling the problem of sick or not-so-sick PSUs. The funds for restructuring of PSUs would be in the vicinity of Rs 3,200 crore.
Agriculture and animal husbandry are likely to witness a major hike in their allocation up from Rs 1,760 crore to Rs 6,900 crore.
However, urban transport may see a fall in its allocation from Rs 2,870 crore in the current year to Rs 1,560 crore in 2009-10. Another loser in this game of losers and winners or snakes and ladders, as some call it, is expected to be Housing and Urban Development Corporation (HUDCO), whose allocation may go down by as much as Rs 1,000 crore.
The Ministries, whose allocations are expected to be at the same level as last year, are those relating to Minority Affairs, Textiles and Tourism.
Surprisingly, the allocation on skill development is expected to go down from Rs 300 crore to Rs 50 crore.
The new year will see the introduction of Unique Identification Cards with the Budget allocating a sizeable amount for this purpose. There is likely to be a continued thrust on exports and infrastructure, the first a victim of the global meltdown and the second a necessity to ward it off.
Sources say a unique feature of the Interim Budget will be measures of a sustainable nature to prepare the economy for the exigencies of the global economy going further down the drain.
The last Budget of the UPA government comes at a time when the world economy is facing its most difficult times ever since the Great Depression of the 1930s. The Chief architect of the revival of the Western economies was the wizard of the century, Lord J M Keynes, a multi-faceted personality who left his mark on history. So powerful was the logic of his theory that countries today again in a similar situation resort to his wisdom.
But the Budget also comes at a time when the General Elections are knocking on the doors. In a democracy like India, the logic of elections can never be ignored, for survival comes first and everything else later.
But unlike the Railway's Vote-on- Account, Lalu's populist train moved faster. Perhaps, that was always the case for the General Budgets have been different.
The most interesting dimension of the Interim Budget will be to see how it does the balancing act. Mr Pranab Mukherjee is known to be a seasoned politican, a dexterous person and also an old hand at economic management. His skills will be on test once again tomorrow.
GENERAL BUDGET
Def. spending up 34%, hike in flagship programme to woo masses
New Delhi , Feb 16 (UNI) In a clearly election oriented strategy, the Interim Budget 2009-10 today hiked Defence spending by an unprecedented 34 per cent to Rs 1,41,703 crore and enhanced allocations to flagship programmes.
However, no new stimulus package or changes in the tax structure were announced in the Budget presented by Finance Minister Pranab Mukherjee in the Lok Sabha.
The Budget saw nearly 15 per cent of the total spend of Rs 9,53,231 crores being allocated to the Defence sector. The message that the government intended to give to the people was that the security of the nation is the prime concern in the wake of terror strikes like the recent Mumbai attacks.
Observers say this could take the sting out of the BJP election plank that the government was soft on terrorism that was the most formidable threat to the country.
While there was hardly any announcement of new programmes, the allocation to certain key Flagship Programmes as well as those outlined in the National Common Minimum Programme (NCMP) has been enhanced, with a view to woo the rural masses. For instance, spending on National Rural Employment Guarantee Scheme (NREGS) was given a major hike as also the allocation to agriculture.
The only two new schemes that found a place in the Budget were Indira Gandhi National Widow Pension and Indira Gandhi National Disability Pension Scheme.
A key highlight of Mr Mukherjee's speech was an extension of interest subsidies to debt-hit farmers, one of the first measures in the Budget.
He also announced that the India Infrastructure Finance Company will raise Rs 10,000 crore from the market by end of March 2009. India Infrastructure Finance Company will finance 60 per cent of commercial loans in private public partnership in critical projects, he said. The organisation is to raise Rs 30,000 crore from the market in the next fiscal year.
The Finance Minister refrained from tinkering with tax and duty rates in the Budget and increased by a huge allocation of Rs 30,100 crore to government's flagship rural employment programme and many other schemes in a bid which would also help counter the economic slowdown.
Mr Mukherjee projected a smaller budget deficit next year, leaving to the next government that may be voted in by May to decide on another stimulus package.
The budget shortfall will narrow to 5.5 per cent of gross domestic product by March 31, 2010 from an estimated 6 per cent in the current fiscal year, Mr Mukherjee said.
He said the new government will have to increase spending by as much as one per cent of GDP to protect Indian economy from a global recession that may continue through the year.
Justifying the status quo on the tax structure, Mr Mukherjee said ‘’constitutional propriety’’ demanded the government did not announce new tax rates or policies in the Budget.
The statement was aimed at obtaining Parliament’s approval for spending in the first four months of the next fiscal year.
Projecting a GDP growth rate of 7.1 per cent for 2008-09, Mr Mukherjee indicated a much higher level of fiscal deficit of 6 per cent of the GDP.
The below the line fiscal deficit would be of the magnitude of 1.5 per cent of the GDP, taking the total deficit to 7.5 per cent of GDP.
The Budget did not meet either the approval of the industry nor the stock markets, or the political parties for that matter.
The opposition charged that the measures would not get the economy out of the slowdown phase. Mr Mukherjee has lost a critical opportunity to take the economy out of the morass that it finds itself in they said.
The Budget was aimed at political gains in view of the General Election just a few months from now they added.
Industry saw a policy paralysis for the next few months, the only move possible being in the realm of monetary policy.
The benchmark Sensitive index plummeted 3.4 per cent to 9305.45 on the Bombay Stock Exchange as the players felt that the government had announced no new incentives to address the problems of sagging sectors.
Taking into account of vows of export community, the government extended interest subvention of two per cent for the entire year.
The slowdown has impacted on the government's revenue with tax collection being projected lower by Rs 60,000 crore than the Budget Estimates.
Through the Interim Budget, the government seeks to obtain a sanction from Parliament to incur expenditure in the months before the new government comes to power. The Budget for the full financial year starting from April 1, 2009 will be presented once the new government is elected.
The increased spending necessitated by the two stimulus package and large subsidy pay outs will have to be funded through borrowings. Credit rating agencies have warned that a rise in the deficit would lead to rating downgrades and deter investors from buying Indian debt.
Mr Mukherjee said there was need to accelerate reforms, mostly in the financial system to get back to the nine per cent sustainable economic growth. This was a mere exhortion, devoid of any concrete action.
Reiterating that there will no new fiscal stimulus package for the current fiscal, the government, however, gave an assurance that it will act as and when required to give a push to the economy.
The government said that it has sought 4.2 billion dollars additional assistance from the World Bank, of which three billion dollars would be for recapitalisation of Public Sector Banks.
The fund from the World Bank for recapitalisation of banks will have its play in the next two years and beyond to assure that their CRAR does not fall below ten per cent.
Officials said the government would raise Rs 45,000 crore in consultation with the Reserve Bank of India to fund enhanced government expenditure. This would not be in the nature of market borrowings, but its mode was being worked out.
The assistance of 4.2 billion dollars from The World Bank is intended to be used for the fiscal 2009-10 and the monies can be spent in the subsequent years.
The package from the World Bank has been necessitated to ward off the negative impact on the Indian economy of the global slowdown.
Observers say a confident Congress-led government riding high on the recent State-election results, choose to play safe in the Interim Budget. The last public pronouncement on its financial strategy was merely intended at creating another pro-'aam addmi' slogan that would help it draw public sentiments in their favour.
They said the fact that Mr Mukherjee chose to link defence spending with the Mumbai attacks clearly meant that the UPA Government would go to the masses saying the government's prime concern was social and defence security, perhaps more than economic liberalisation.
Political pundits say the master stroke of the budget exercise is that Mr Mukherjee kept tax incentives out. By doing so while the government may have temporarily displeased the industry, but it will provoke the media to talk just about its pro- rural development strategy and the security imperatives.
Dichotomically, Railway Minister Lalu Prasad, who is the unquestioned leader of the RJD and a coalition partner, did not follow the same strategy. The pundits say Mr Prasad is not as comfortable as Congress in getting a fresh mandate, facing tough competition from his rival Nitish Kumar, who seemingly has transformed Bihar.
The shrewdness of the economist-led government lies in the fact that Flagship Programme got a major boost as much as for reasons of equity as part of the stimulus package. Not without reason, Mr Mukherjee ended his speech by saying that he had no doubt that when the time comes, people will recognise the ''hand that steered the country through difficult time and made 'Aam Admi' as the focus of the development process.''
RAILWAY BUDGET
A populist Interim budget slashes fares 2%; 43 new trains & moreNew Delhi, Feb 13 (UNI) With General Elections around the corner, Lalu's populist train moved faster, slashing passenger fares by two per cent almost across the board, imposing no new freight charges, launching 43 new trains and extending another 14 in the Interim Railway Budget presented today in the Lok Sabha.
A fast-growing and modern India is to see more bullet trains like in Europe and work to commence soon on the Eastern Dedicated Freight Corridor (DFC).
Typical of his style, Railway Minister Lalu Prasad's hour-long speech was sprinkled with wit and humour as it laid to rest the speculation whether an interim budget can bring about any new proposals. In a way, it had the makings of a full-fledged budget, which gave an opportunity to the Opposition to lambast the Railway Minister for presenting a "directionless budget which was neither full nor an half, but a vote budget."
In a please-all affair, Lalu brought about a two per cent reduction in fares for tickets costing more than Rs 50, including second class and sleeper class tariffs of all Mail, Express and ordinary trains.
Fares of all AC first class, AC-II and III tiers and AC Chair Car have also been reduced by two per cent, apparently to ward off the threat of competition from low-cost airlines.
To pander to the common man, the Minister announced reduction in fares of ordinary passenger trains by Re one, for fares upto Rs 50 for a journey more than ten kilometres.
The last budget of the UPA government also saw the announcement of several measures to improve passenger amenities, but surprisingly nothing for the elderly or the disabled as well as no further moves towards creating infrastructure for the 2010 Commonwealth Games.
The 'turnaround guru' who now has many admirers in the West, projected a cash surplus before dividend at Rs 19,320 crores.
While the stock market gave a thumbs up paradoxically to the election-oriented budget, lifting the sombre mood of the Bombay Stock Exchange by a stupendous 168 points rise, captains of industry were critical that an opportunity has been missed of bringing down freight rates to help the business community tide over the morass it finds itself in because of global economic meltdown.
The plan outlay has been pegged at Rs 37,905 crores, but the implementation of the Sixth Pay Commission Report by the Public Sector behemoth will see Railways bearing an additional burden of Rs 13,500 crores, increasing the operating ratio to 88.3 per cent, a figure much higher than that of last year.
The reduction in fares will cost the Railways a whopping Rs 700 crores.
In defence of the budget, officials said the vote-on-account of the Railway Ministry has a lot for everybody and an impetus formall-round growth.
They said as per the practice, the vote on account does not have major policy pronouncements as a full-fledged budgetary exercise will be undertaken by the new Government in July.
The budget raised hopes that another fiscal stimulus package is on the offing in the Interim General Budget on Monday, which may include tax rate cuts.
In the customary press conference after the presentation of the budget, Mr Prasad put up a stout defence saying that the reduction in fares was not with an eye on elections, but in line with what he has done in his five past budgets.
He also denied the charge that the budget was Bihar-centric as what had sought to be been done was only a correcton of the historic mistake of ignoring his backward State.
Unfortunately for Mr Prasad, the presentation of the rail budget in the Rajya Sabha was marked by noisy scenes and slogan-shouting as an aghast BJP chose to highlight the issue of former Finance Minister Yashwant Sinha being attacked in Jharkhand.
The proposals entail starting a Bullet train service between Delhi and Patna. A pre-feasibility study of the project is to be carried out in the near future.
This would be in addition to the bullet train projects already announced between Delhi-Amritsar, Ahmedabad-Mumbai-Pune, Hyderabad-Vijayawada-Chennai, Chennai-Bangalore-Ernakulam and Howrah-Haldia.
The Minister said after commencement of the work on Eastern Dedicated Freight Corridor (DFC) near Dehri-on-Sone earlier this month, work on the Western DFC will begin this month itself.
After the launch of the first train service in the Kashmir valley recently between Anantnag and Rajwansher, another service is to be started between Baramullah and Qazigund.
The 43 new trains, which include four 'Garib Raths,' pertain to all parts of the country. These include Secunderabad-Manuguru Superfast (Daily) Mumbai-Karwar Superfast (Tri-weekly), Bhopal-Lucknow Junction Garib Rath Express (Weekly), Ajmer-Bhagalpur via Delhi Garib Rath Express (Bi-Weekly), Nizamuddin-Bangalore via Kacheguda Rajdhani Express (Tri-weekly) Barauni-Delhi Jan Sadharan Superfast (Bi-weekly) Mumbai-Varanasi Superfast (Daily), Mysore-Yesvantpur Express (Daily) Jamalpur-Gaya Passenger Korapur-Rourkela Express via Rayagada (Daily) Agra-Ajmer Superfast (Daily) Sitamarhi-Patna Link Service (Daily) Tiruchchirapalli-Madurai Express (Daily) Mumbai-Bikaner Superfast (Bi-weekly) Agra-Lucknow Junction Shatabdi Express (Daily) Gandhidham-Kolkata Superfast (Weekly) New Delhi-Guwahati Rajdhani Express via Bhagalpur (Weekly) Howrah-Delhi Link Service via Azimganj-Bhagalpur (Weekly) Sitamarhi-Delhi Garib Rath Express via Patna (Weekly) Ranchi-Patna Jan Shatabdi (Daily) Jhansi-Chhindwara Superfast (Bi-weekly) NewDelhi-Guwahati Rajdhani Express via Muzaffarpur (Weekly) Varanasi-Jammu Tawi Superfast (Daily) Gwalior-Bhopal Intercity Express via Guna (5 days a week) Howrah-Haridwar Superfast (5 days a week) Jammu Tawi-Darbhanga Garib Rath Express (Weekly) Mumbai-Jodhpur Express (Weekly).
The trains whose extensions were announced include
5761/5762 Ranchi - Alipurduar Express to Guwahati, 9269/9270 Porbandar - Bapudham Motihari Express to Muzaffarpur, 1471/1472 Jabalpur - Bhopal Express to Laxmibai Nagar, Indore, 6865/6866 Ernakulam - Tiruchchirapalli Express to Nagore 3155/3156 Kolkata - Darbhanga Mithilanchal Express to Sitamarhi and 2175/2176 Howrah - Gwalior Chambal Express to Mathura.
Frequency of certain trains was also announced. These include
2423/2424 New Delhi - Guwahati/Dibrugarh Rajdhani Express from five days to six days. 2443/2444 Bhubaneshwar - New Delhi Rajdhani Express from two days to four days, 2211/2212 Nizamuddin – Bapudham Motihari - Garib Rath from weekly to Bi-weekly, 7091/7092 Secunderabad - Patna Express from Bi-weekly to Daily, 2111/2112
Amravati - Mumbai Amravati Express from Tri-weekly to Daily and 2957/2958 Ahmedabad - New Delhi Rajdhani Express from six days to Daily.
There is also a proposal to construct nine Railway Overbridges and Under Bridges during the year.
The Minister delved at length on the achievements of the Railways during the tenure of the UPA government, one of these being significant reduction in rail accidents from 325 in 2003-4 to 194 last year.
Typical of his style, Mr Prasad's speech was peppered with some Urdu and Hindi couplets, as well as rustic remarks and had a befitting ending, with the Minister saying that the UPA government was leaving the public sector behemoth on a ''rock solid foundation.''
Gurdeep Singh
Head of Business & Economy and Vice-President FFW
Gursingh111@rediffmail.com
