Budget FY12

Budget FY12:
From an economics point of view, here is what I expect should happen:

1. Strengthen FRBM and target 4.3% fiscal deficit ( since with overspend we will realistically achieve 4.5%)

2. Take steps to control current account deficit. Really little scope for increase exports. Idea should be to reduce import burden by promoting alternatives to imported oil:
a) Incentivise prospecting and stable governance for technology to get into India for Oil/Gas prospecting, discovery, production
b) DGH to incentivise shale gas production
c) Technology import to be incentivised (150% depreciation?), acquisition of oil field services companies abroad promoted
c) Gas/LNG imports, IPI pipeline, Coal Washeries by Oil India
d) Biofuel(though it has a downside on food prices)

3. Rein in speculation on perishable food, grains and metals. Strengthen PDS or at lesat take steps in that direction and set a policy framework (An agriculture minister saying non-foodgrains esp. vegetables are not as part of his department purview does not really help bring down prices, does it?)

4. Bring some fiscal responsibility to states, stop free SOPs - free electricity, fertilizer subsidy etc. Reform SEBs. Privatise quasi-governmental institutions used to subsidize and pay all subsidies from your own budget (includes ONGC, OIL, OMC's, SEB's)

5. Widen the tax net, include the current exclusions. Keep tax slabs unchanged at least for 5 years and create a policy to notify changes at least 2-3 years in advance

6. Too many too small banks, begin merger procedure. Strengthen 2-3 state-owned banks to achieve global Top 20 brackets

7. Spend on infrastructure (INVEST) - Power, Roads, Bridges, Ports, PDS. Not on sops (EXPENSE OUT) which only overheats the economy.


Given elections in states, here is what will probably happen:
1. Target 4.5% achieve 4.7% and then reduce by disinvesting wealth accretive units of the govt.

2. CAD un-touched, incentivise non-competitive industries which have better clout

3. GST Rollout delayed, a PDS policy framework which is so loosely defined that it is never implemented.

4. Pandering to popular sops - fertilizer subsidy, no change in diesel rates, subsidy on GAIL, ONGC etc(not so much on ONGC since govt. needs to divest)

5. No steps to include agriculture under the tax net