Union Budget 2012-2013 : Tit-bits as budget of the First Year of a New Plan

Amar Yumnam *

The country has had her latest Union Budget with the presentation of the 2012-2013 Budget by Pranab Mukherjee today in the Parliament. The initial lines remind me of the period under Indira Gandhi when "Inflation is a global phenomenon" was the excuse for all domestic policy failures. The Finance Minister has given the following objectives of the new budget:

• A. Growth recovery on the strength of domestic demand;
• B. Revival of private investment;
• C. Reduce supply problems in agriculture, energy and transport;
• D. Reduce malnutrition; and
• E. Address governance and corruption issues.

The Context: Pranab Mukherjee has presented the latest budget in the context of certain realities. First, the forthcoming fiscal is the first year of the Twelfth Five Year Plan. So the significance of this budget is different from any other budget of intra-period years. Second, the leading party in power has already lost in terms of governance capability, public credibility, political arena, growth performance of the economy and the overall credibility in the eyes of the general population of the country.

Since it does not have any more to lose, it is the moment it can afford to be very radical and path-breaking in terms of policy formulation. Third, the country does need to recover from the recent growth retardations. Fourth, the new budget should manifest the direction in which the government is moving in a way to address the Anna Hazare Effect which has hit it so badly.

Besides these, there are other needs from the angle of the North East. First, in the recent elections the region has retained two governments of Assam and Manipur in the hands of the party in power in the centre unlike anywhere else in the country. Any sensible and grateful party would definite try to return the gift in real terms with specific programmes.

Second, the region has long suffered from policy absence in terms of infrastructure (social and economic), particularly for areas least developed and settled by less developed groups of population. Since we are on the eve of a new plan, and given the emerging political fate of the party in power in the Centre, the new budget should give a new direction for covering these areas and places in the development trajectory.

Third, the region is now characterised by a rising tide of ethnicisation of all political, economic and social articulations. The budget in the first year of a new plan period should naturally provide a framework for addressing these issues. Fourth, there is the strong wave of globalisation hitting the boundaries of the region, and as such the budget should reflect application of mind and evolution of schemes for preparing the region for the forthcoming competition.

The Analysis: This gives us three ways to examine the budget proposals from three angles, one from the angle of the objectives specified in the budget itself, two from the context of country level needs, and third from the perspective of the North East.

First is the issue relating to the objective of growth recovery. The budget specifies that it would be done based on domestic demand. This is a right approach as such as the recent review of growth experiences of developed countries has revealed. An examination of the budget however fails to bring forth any comprehensive and rooted policy for raising domestic demand. In such context, it is hard to imagine how the new growth recovery would happen.

Second is the objective raising private investment. Well, the budget does reflect programmes to salvage the enterprises like the Kingfisher Airlines. It also speaks of welcoming foreign investment. In this we are compelled to be sceptical about the probability of the attractiveness of India to foreign investors on a term favourable to India, and particularly so because India failed to be an attractive agendum in the recent World Economic Forum at Davos.

The commitments in the budget do not reflect a firm determination to address the issues relating to agriculture, energy and transport. While these sectors are not ensured of technological innovations, it is difficult to imagine the possibility of the growth recovery happening. The next objective of addressing malnutrition is however accompanied by a firm determination as reflected in the budget. Unfortunately when it comes to the most important, politically as well as economically, aspect of governance and corruption, the budget betrays the lengthening shadow of confusion and policy lethargy in this area.

When it comes to the contextual realities at the national level, the budget reflects no firm direction of efforts to address the expectations mentioned above. If the current year has been one of "growth interrupted" the new budget is one of history moment missed.

The same picture remains when we examine the budget from the perspective of the North East. It is very poor politically for it did not think of repaying the debt owed to the people who have reposed faith in the political party in power in the Centre. Further, the budget does not contain anything significant for the region.

The research grant to the University in Itanagar and the Handloom centres in Nagaland and Mizoram are good and important but they cannot be called significant. The endeavour to give a unique identity to the handloom products of the region is important. The larger design for the region is absolutely missing the budget for the First Year of the Next Plan.

Overall, we would say that the new budget is the dullest one we can have in the first year of a new plan period. It is displays absolute lack of courage at a time when the government needs to display only courage for it has nothing more to lose. Above all, the budget seems to reflect the absence of an appropriate power centre inside the government who would an authority on national issues. The country can do better even without this budget.

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* Amar Yumnam writes regularly for E-Pao.net & The Sangai Express.
The writer is the Dean: School of Social Sciences, Manipur University, Director, Centre for Manipur Studies at Manipur University and a Professor at the Department of Economics, Manipur University. He is also the President of North Eastern Economic Association.
The writer can be contacted at yumnam1(at)yahoo(dot)co(dot)uk
This article was webcasted on March 18, 2012.

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