Budget...FM shuns populism, embraces pragmatism

Thankfully for the benefit of all, Union Finance Minister Pranab Mukherjee shunned populism and chose a more balanced approach in devising the Budget for 2010-11. There weren't too many big bang reform-centric announcements. But, what probably came as a relief to the markets was absence of major negatives, barring the hike in MAT and increase in the levy of oil prices. Still, it wasn't completely devoid of concerns, especially given the fact that the Finance Minister failed to give any definite timeline on key reforms - GST, DTC and Oil Subsidies. In short, the Finance Minister has laid emphasis on consolidating the economic recovery, improving investment environment, inclusive development, strengthening transparency and public accountability.

The Finance Minister said the Indian economy is in a far better position than a year ago. At the same time, he cautioned that there are challenges that face the Indian economy even today. The first challenge is to return to the high GDP growth path and to attain double digit growth in the next few years. The second challenge is to harness the economic growth and make development more inclusive. The third challenge is to improve the delivery mechanism.

FY10 was a challenging year for India. The deceleration in the economic activity in the second half of 2008-09 led to a GDP growth of 6.7% versus an average 9% in the previous three years. However, the Finance Minister also said that the ongoing economic recovery is encouraging. There is momentum in manufacturing and signs of a turnaround are also visible in merchandise exports, he said. He went on to add that inflation has to be contained and the Government should ensure better management of the food economy.

The Finance Ministry will bring out a status paper and a road map on curtailing the overall public debt, as suggested by the 13th Finance Commission. This will be followed by an annual report, the Finance Minister said. The Government will endeavour to introduce the GST and Direct Tax Code in April 2011 while proceeds from the PSU disinvestment will be increased in FY11