The Hindu Business Line : Rising fiscal deficit, a worrisome factor

The Budget proposals are high on populism with a plethora of relief and concessions to different segments of the vote bank and in the process fiscal prudence has become a casualty.

The rising fiscal deficit is a worrisome factor. The proposals are a mix of good politics and bad economics and indifferent to some of the vital areas of the economy.

The Budget has not focussed on the reforms of banking sector and the implementation of Raguram Rajan Committee Report would have a positive impact on the financial sector.

On the direct tax front, the exemption limit for senor citizens is raised by Rs 50,000 and it is only marginally increased by Rs 10,000 for others.

The individual taxpayers are neither better off not worse off because of this marginal increase.

The Finance Minister should have raised it by Rs 50,000 for all classes of individual taxpayers which would have cheered a large number and would have resulted in a considerable reduction in the number of tax returns and better management of processing of returns.

Some of the measures announced would bear fruit only if the economy bounces back to growth path in the near future.

There is a renewed emphasis on infrastructure in the proposals.

But, there is a lull in financing to the infrastructure sector of late by banks and the proposals are intended to put infrastructure lending back on rails.

The measures viz., IIFCL to evolve mechanism for increased funding of infrastructure projects and to re-finance commercial bank loans up to 60 per cent in critical projects through public-private partnerships to the tune of Rs 1 lakh crore will bear fruit only if the enabling environment is created.

The allocation to housing and amenities to urban poor (less than Rs 3,987 crore) in a country of our size is inadequate.

The Finance Minister has hiked the farm credit target and announced interest rates incentive to farmers to repay loans on time and an additional allocation for accelerated irrigation scheme.

Going by the past years performance of commercial banks, most banks have not attained the target of 18 per cent under direct lending to agriculture.

With poor recovery rate and a fall in credit offtake, it would be difficult for banks to pump in more credit to the farm sector.

In short, the Budget has not played the catalyst role in reviving the economy.

M. Ravindran, Mumbai