Union Budget: False commitments?
3/8/2012 9:00 PM Thursday
Very recently, the government froze the accounts of four charities and deported a German tourist for participating in anti-nuclear demonstrations against the Russia-built Kudankulam facility in Tamil Nadu. The manner in which the government has taken action indicates its strong resolve to push ahead with the project. However, what is required is not just a few pockets of strong action that support the government’s pet projects, but a wide range of policy actions that will help the economy grow at its potential rate.
The Finance Minister will be presenting the Union Budget this week, and we feel that this is just the right time to take stock of some of the major policies promised by the government during the last two years’ budgets, and to check if it really did deliver on what was promised or is the budget just a time-filling exercise?
An objective analysis of the budget policies over the last two years presents a sad story of failed and missed promises. The 2010-11 budget was the one that came after the government had taken some strong steps by providing a stimulus package to counter the effects of a global turmoil unleashed by the US sub-prime crisis. The main challenge then was to reduce the public debt to GDP ratio. This was duly acknowledged and announced in the Union Budget of 2010-11.
However, at the end of FY11, the total debt to GDP ratio still stood at 66.2 per cent. Although it had come down from 75.8 per cent recorded during the preceding year, it has still remained one of the highest in the region. The importance of this ratio can be understood in light of the crisis in Europe, which has a lot to do with the higher debt of the economies there. Hence, the government should act with urgency in this matter, and bring the debt to GDP ratio back to a comfortable level.
In the last budget (of 2011-12), the Finance Minister announced the introduction of the Public Debt Management Agency of India Bill. Despite this, the government still pushed the task of debt management into the RBI’s court. A rise in public debt will increase the debt servicing requisition of the economy, diverting money that would otherwise have been used for productive purposes. In the last one year, the debt service ratio of India has increased from 4.2 per cent of the GDP to 4.6 per cent.
Finance Minister, Pranab Mukherjee, presenting the Union Budget in the House.
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