The Union Budget 2008-09 is a fine balance achieved by reckoning the political context and economic principles.

What has helped the Finance Minister is the backdrop of an excellent scorecard: an estimated GDP growth rate of 8.7% despite global slowdown, buoyant revenue receipts exceeding estimates and deficits in line with milestones.

The Budget addresses the recent loss of momentum in economic growth. It addresses the national priority of inclusive growth. It also recognizes the need to rein in inflation.

The FM’s prescription to promote consumption is classical and proven: increase disposable income by reducing personal tax burden; simultaneously slash prices through excise duty reduction. The massive outlay for social infrastructure and the rural sector will also fuel consumption.

Health, education and rural development continue to be in focus. The increased Budget support for the flagship national construction programmes show the Government’s serious desire to achieve inclusive growth. One commendable new step is the establishment of a non-profit corporation for skills development. It addresses a fundamental malady. One wishes a similar approach were taken in respect of agriculture where the fundamental issue is the low capital formation which needs to be raised. In that classical sense, the agricultural loan waiver can be questioned on moral grounds, but hanging on the other side of the balance are human lives.

For the commercial vehicle industry, as for the rest of the industry, excise duty reduction is a move in the right direction as it reduces the embedded taxation and improves competitiveness of the Indian industry.I particularly welcome the additional excise duty reduction in respect of bus and chassis – public transport has a potentially much larger and beneficial role to play. I also welcome the tax incentives for green technology.

One major sector that possibly did not get its due is the infrastructure sector – unless one interprets this as the major role expected of private investments. There could also be questions on hiking the short term capital gains tax at a time when the market is bearish.

Rating : Not Rated