INDIAN economy with an annual growth rate of 8.75 per cent is moving fast if not galloping and beating the developed world where economic meltdown is far from over. The economy could grow by 9 per cent the next year.

Economic growth is supported by strong fundamentals. Gross domestic savings stood at 32.5 per cent of GDP in 2008-09 and the gross domestic capital formation was 34.9 per cent. The outlook for foreign trade is improving with both world output and trade volumes picking up, though this recovery is remains fragile. The broad-based recovery creates room for a gradual roll-back of the stimulus offered over the last year and a half.

Yet how come over fifty per cent of the Indians remain poor , surviving on just sixty rupees a day. How do we account that 40 crore people have no access to drinking water and close to 70 per cent have no toilets , leading to sickness all around.

Agriculture sector is hard pressed with a negative growth of 0.2 per cent and food inflation close to 20 per cent is hitting not only the poor but even the middle classes. Yet  finance minister Parnab Mukherjee has only paid lips sympathy to this important sector that takes care of 50 per cent of population. This sector also feeds and sustains industry and service sectors. These are the farmers who purchase 50 per cent of the television sets, ten per cent of cars, 40 per cent of two wheelers and much more. Except in the well irrigated lands of Punjab, Haryana, Western Utter Pradesh, parts of Maharashtra, Gujarat, Tamil Nadu and Karnatka, rest of India just survives.

The Economic Survey had argued that the time had come for a shift to an “enabling” rather than an interventionist state. That shift was supposed to deliver non-intrusive governance. It meant to help those who are poor and marginalized. It was supposed to ensure fiscal consolidation through a reduction in the fiscal deficit. Mukherjee has betrayed all this . Small concession in a budget that is leading  to inflation means nothing.

Also , there is no visible effort to prune expenditure and improve governance, one of the causes of India's poverty. Government’s own estimate say that just ten per cent of money released for development actually reaches the beneficiaries.

How far has the Finance Minister gone in sustaining expenditures and pushing his objective of being more inclusive? And, to the extent he has, how has he mobilised the requisite resources and what are the resulting implications?

Gross expenditure on Literacy and School Education is slated to rise from Rs. 39,553 crore to Rs. 47,773 crore and on Higher Education from Rs. 14,376 crore to Rs. 16,690 crore. In addition, the central plan outlay on Health and Family Welfare is projected to rise from Rs. 18,283 crore to Rs. 22,300 crore. But, all this is partly the result of a reallocation of expenditures. Thus, non-plan expenditures on all social services are slated to fall from Rs. 35,146 crore to Rs. 29,483 crore or more than Rs. 5,500 crore. A planned cut in subsidies on food and fertilizer, which would impact on the poor and sectors like agriculture is clearly reflected in the budget.

Through an “across-the-board” hike in non-oil excise duties, adjustments in customs duties, higher duties on oil and petroleum products and expanded taxes on services, the Finance Minister expects to garner an additional Rs. 70,000 crore of indirect tax revenue. This is a reversal of the practice of relying less on indirect and more on direct taxes in recent years. Indirect taxes are known to be inflationary in nature, hurting the poor in the process.

This budget is sure to lead to inflation, increase in disparities and social tensions and hence more money to to be spent on internal and external security than on welfare. Increase in the price of petrol and diesel has automatically pushed the prices , all across the board and this was visible on the day of the budget.

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