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Wednesday, March 05, 2008

Budget 08-09 - What's the big !dea?

And, Finance Minister P Chidambaram has presented the budget for the year 2008-09. Lots of bouquets and brickbats......yes, but what is the bottom-line?
The two things that dominated all discussions seem to be the farm debt waiver plan and the substantial relief for the salaried class..And, therein lies the big idea, at least to me.
Almost all people know that even as growth rates are moving up, agriculture continues to be the laggard. Yes, farmers are in distress, the farm sector employs more than 60% of our workforce and with each passing day the farmers are finding it more and more difficult to continue with farming. But, debt waiver is a patently wrong idea in that it sends out a wrong message to the borrowers - "do not repay; the government will waive it" - as well as the lenders (mostly banks) - "Give them loans; we will give it back to you". It may be OK with public sector banks, but what about the private banks? How can the government dictate to them how to lend and waive debts? What happens to the net worth of the banks and ultimately the country?
Again, who are going to benefit from the scheme as is proposed? Farmers' miseries are caused, inter alia, due to their borrowals from the informal sector, at usurious rates of interest. But, the waiver announced now does not cover these borrowings. Add to that, there are several "Conditions Apply" tags - you have to be small farmer, having the specified area of land, borrowals upto the specified date, and so on. Doesn't misery / drought strike uniformly? Why these restrictions, then? There is also the news that the bulk of the amount will go to the co-operative banks! We all know the set-up in co-operative banks - it's the petty politicians' goldmine. Rather than letting the money go down the drain, the Rs 60000 Cr estimated as the waiver amount (how did he arrive at that 'magical' figure, by the way?) could be better deployed in developing agri-infrastructure.
Again, surprisingly, no resources have been allocated for this plan. The Finance Minister says he is intelligent and that he will soon spell these out. One hopes he does it soon! What about raising the money through disinvestment in public sector undertakings? Go and list PSUs like BSNL, MTNL, LIC and further stake sale of other listed PSUs? After all, Economic Survey also suggests it. Left too will not oppose it! "Disinvestment for farmers' welfare" - this is the 'big idea' for me!!!
The income tax incentives, in my view, were long overdue. But, the FM could have hiked the savings limit u/s 80C to something like 1.5 lac. But, the FM seems to have an ace up his sleeve - he may be believing that what he gives away by way of raising the exemption limit and change of slabs, he is going to get it all back (and may be more) once the 6th Pay Commission submits its report and it is implemented!! Another 'big idea'!!