Union Budget 2012-13: Policy Paralysis Or Insensitive Market Fundamentalism

R.Srinivasan Associate Professor Dept of Econometrics University of Madras 20.03.2012

Particulars Agriculture, etc Mining etc Manufacturing Electricity

2010-11 7.0 5.0 7.0 3.0

201112 2.5 -2.2 3.9 8.3

Construction
Trade, hotels, etc Financing, etc. Community, etc GDP

8.0
11.1 10.4 4.5 8.4

4.8
11.2 9.1 5.9 6.9

Particulars
Total Final Cons.Exp

201011
8.1

201112
6.0

Pvt. Final Cons Exp

Govt Final Cons Exp Gross Capital Exp

8.1
7.8 11.1

6.5
3.9 5.8

Export

22.7

14.1

Year 2008-09 2009-10

Fiscal Deficit 6.0 6.5

Tax-GDP 7.9 7.1

NonPlan- Plan Exp- Total ExpGDP GDP GDP 10.8 11.2 4.9 4.7 15.7 15.9

2010-11
2011-12 (RE) 2012-13 (BE)

4.9
5.9 5.1

7.3
7.3 7.6

10.6
10.1 9.5

4.9
4.8 5.1

15.4
15.0 14.6

Particulars 2008-09
Direct Tax Corporate Tax 52.8 35.3

2009-10
58.8 39.2

2010-11
56.2 37.7

2011-12
54.8 36.3

2012-13
52.2 34.6

Personal Income Tax Indirect Tax Customs Duty Excise Duty

17.5
47.2 16.5 17.9

19.6
41.2 13.3 16.5 9.4

17.5
43.8 17.4 17.4 8.9

18.5
45.2 17.0 16.6 10.5

17.6
47.8 17.3 18.0 12.0

Service Tax 10.1

Particulars- Revenue Foregone Corporate Income Tax Personal Income Tax Excise Duty Customs Duty

Total Revenue Foregone

Total Revenue Collected

2010-11 Rs Crore 57912 (10.2) 36826 (6.5) 192227 (33.7) 172740 (30.3) 459705 (80.6) 569869

2011-12 Rs Crore 51292 (8.0) 42320 (6.6) 212167 (33.0) 223653 (34.8) 529432 (82.4) 642252

Major Issues Before Budget 2012-13

Decline in Growth due to demand constraints Need for effective Food Security System Need for comprehensive social security system Enactment of DTC and GST Address issues in agriculture sector Improve health and education services Improve working of MGNREG Scheme

Measures to Improve Demand

Concessions in Personal Income Tax Reduction in rate on PF Tax concession for small investors in capital market Easy money policy to follow lower FD Increase in Central Excise Duty rates Negative in service tax

Lack of Foresight
Increase in allocation on social welfare programmes are either indexed to inflation or real growth in economy Strategic change in agricultural plan is absent, which is still monsoon dependent, with the imperfect markets for inputs and outputs All social security expectations belied lack of new initiatives in tax mobilization and for increasing public expenditure, freeing of foreign investment, nebulous expenditure projection shows both policy paralysis and market fundamentalism mindset.