Lacklustre show

Indian Finance Minister Palaniappan Chidamabaram, who presented the budget for 2006-07, has managed to please everyone by doing little. His government, which needs the support of the Left parties for survival, has pledged to raise spending on health, education and rural infrastructure while at the same time promising to aim at fiscal prudence. The corporate sector is breathing easy as no new tax has been introduced. The middle class is happy, for they can look forward to owning small cars, for which the taxes have been slashed, and some of the auto majors have already promised to pass on the benefits to the customers. But it looks like Chidamabaram was loath to mollycoddle the middle class too much. Hence the proposal to treat services and goods on an equal footing. This means an additional 10 per cent service tax on mobile bills. A service tax on ATM (automated teller machine) transactions is also very much possible.
The finance minister expects the country to maintain the growth momentum at 8.1 per cent this year and plans to raise that to 10 per cent in the coming years. This he thinks is the best way to raise his 260 million countrymen, a quarter of its billion-plus population, out of poverty in the continent-sized country. “I believe that growth is the best antidote to poverty," he said. But though the government has accepted that export-oriented growth, as has been seen in China, is the best way of spreading wealth among the poor, the finance minister has not made any far-sighted proposal on removing the impediments to the country’s emergence as an export powerhouse -- poor roads, congested ports and shortage of power. Instead, the coalition, which came to power in 2004 on a ticket of lifting the poor out of poverty, is doing something on that front now that elections in five states are around the quarter, which could pit the collation partners against each other. Hence the finance minister’s thrust on increasing education spending by 31.5 per cent, health by 22 per cent and boost spending on rural infrastructure projects to Rs186.96 billion.

The budget is also short of any reform proposals for the labour market. That will keep the Communists happy -- their bread-and- butter is unharmed -- who cares for good investment climate as long as the unions have their way? And the stock market is also happy, it was not expecting much anyway. Thankfully, this no-surprises budget does not have anything that could upset the natural growth momentum of the economy. That is small mercy in an election year.

This is an editorial published in Oman Tribune