Pranab’s Predecessor PC Talks Of ‘Can Do’ Spirit, But Taxpayers Left Holding The Can

This parliament session was supposed to have a Budget but no Economic Survey. By a little past noon on Monday, it became clear that there was in fact an Economic Survey, read out at length by stand-in finance minister Pranab Mukherjee, but no Budget to speak of. Politicians are seldom accused of being shockingly proper, but Mukherjee's refusal to use the Interim Budget to even mildly flirt with the voter was almost Victorian in its primness.
    Even as P Chidambaram, who presented the previous five budgets as finance minister, said the Budget showed the UPA's 'can do' spirit, disappointed investors and taxpayers lamented the acting FM's refusal to tweak tax rates along populist lines. He did not even—unlike Jaswant Singh in a similar situation in 2004—promise any if the UPA were to come back. On the contrary, Mukherjee insisted that "constitutional propriety requires that (the) new government formulates the tax and expenditure policies for 2009-10."
    The contrast with Singh's 2004 speech was also highlighted by the two completely different constituencies they addressed. Where 2004 was all about India Shining and the brave new metropolitan Indian taking on the world, Mukherjee's speech was clearly focused on convincing the rural masses that his government had done a lot for them in the last five years.
    Still, Mukherjee's Budget left industry, middle class tax payers and the market with a lingering sense of disappointment. In his speech he did allude to the ''extraordinary'' economic crisis facing the world. Why did it not then merit an extraordinary response, asked many. Why did he not set strict convention aside and provide a stimulus that might have lifted the ponderous economic gloom?
    Since the ''no-change-in-policy'' stance closed the option of any major changes in spends, the budget estimates (BE) for 2009-10 are only somewhat different from the revised estimates (RE) of 2008-09. Thankfully for the UPA, since the RE for the current year is already much higher than BE in many of the electorally sensitive heads, like the National Rural Employment Guarantee Scheme or fertilizer subsidies, this was not really a big constraint.
    The absence of sops—at a time when they could have easily been justified on the grounds of providing a stimulus to a flagging economy — meant that appeals to the voter had to take the form of a reminder of all that the UPA has done for the aam admi. Huge increases in spending on NREGA, Bharat Nirman, the National Rural Health Mission, Sarva Shiksha Abhiyan over the years were what he sought to highlight.
    Not surprisingly, much of his speech recalled the first four years of UPA's tenure. References to the grim economic situation were prefaced by reminders that the crisis was global.
Crushed Expectations
No changes in tax rates, exemption limits
Slowdown, Pay Commission impact tax revenues and spending, fiscal deficit for 2008-09 zooms to 6% of GDP against 2.5% target. Revenue deficit four times higher than budget estimate of 1% at 4.4%
Government borrowing jumps to two-and-a-half times the budget estimates of Rs 1.3 lakh cr to touch Rs 3.3 lakh cr
Fiscal responsibility rules set aside till economy revives, fiscal deficit for 2009-10 at 5.5% of GDP, revenue deficit at 4%
Defence outlay up 34%, but much of it will be spent on higher pay and pensions
Gross budgetary support for next year maintained at the level of Rs 2,85,000cr as reported by TOI last week
MKTS CATCH CHILL
The sensex sank 329 points to close at 9,305 and Rs 90,000 crore of investor wealth was eroded on Monday as the market realized that its hopes of a stimulus package in the Interim Budget were doomed to disappointment. Investors were also unnerved by the minister's acknowledgment that the fiscal deficit in this financial year could be as high as 6% of GDP, given the global slowdown. P 11