India’s Budget: High Growth, High Inflation
— Kul Bushan, New Delhi
You need a PhD in economics and an encyclopaedia on hand to follow the top Indian economists commenting on English news channels about the impact of the Indian Budget on the common man. They freely use the latest jargon of economics and abbreviations of Indian projects (a quick sampler: AADHAR, TAGUP, GST, CRAR, RIDF, NABARD, MGNREGA, RKVY and NFSB) as if you grew up with them. Most of their discussion ranges around the changes in government expenditure and income, the state of the fiscal deficit, the concerns for subsidies, the pace of economic reforms, and so on and on. Of course, all this is meant to inform the TV viewer about how this budget will affect his personal finances, savings, taxes and inflation.
Inflation? Oh yes, food prices have gone up by over 17 per cent. What’s the government doing about it in the budget? Many new schemes and subsidies announcing for farmers and infrastructure. Don’t worry, they will bring down the prices when they are implemented.
Fuel prices? Have shot up after the Middle East uprisings to new heights. Has the government cut down its tax on fuels considering the international oil prices have topped $100 a barrel? No way.
Income Tax? Ah yes, the Income Tax exemption has gone up from Rs 160,000 to Rs 180,000 a year. Now you become a ‘senior’ taxpayer when you reach 60 years instead of 65 years earlier and your tax exemption will be Rs 250,000. A new category of ‘very senior’ taxpayers, over 80 years, gets tax exemption for half a million rupees. All these tax reliefs come into effect on your next year’s income.
What’s gone up and down in prices?
Up – Branded garments, air travel, air conditioned hospitalisation.
Down – paper, chemicals, yarns, TVs, mobiles.
Are Indians going to pay more for their addictions: cigarettes or liquor? No, keep puffing and drinking at the same prices.
Corruption and Black Money? A Group of Ministers has been formed to consider measures for tackling corruption. They will let you know how to curb this rot in ‘a time bound manner’.
Overall, the Indian economy is expected to grow at around nine per cent – one of the highest rates in the world. Inflation? Higher than eight per cent. But, hold on, it will go down.
Up to now, only Foreign Institutional Investors and NRIs could invest in Indian mutual fund schemes. Now, foreign investors who meet Know Your Client requirements can invest in mutual funds. As the Budget speech was in progress the Indian Stock market skyrocketed to over 500 points but after the speech ended, the stock market plummeted and ended with a gain of 122 points. Clearly, the budget did not provide the expected kick-start for a bull run.
So what’s the response? The Indian Prime Minister and everyone else in the government praised the Finance Minister for this budget. The opposition lashed out at it – both the sides speaking true to form. But what about the common man still suffering from high prices? He will have his say at the voting booths of five states in a few weeks.