Kudos to finance minister for a bold, pragmatic Budget

Contrary to the market reaction, I would like to compliment the finance minister on an extremely bold and pragmatic Budget. While the market seems to be disappointed that he has not made some popular statements (for e.g. FDI liberalisation or reduction in corporate tax or removal of STT),

I feel he has done a tremendous job in making the right choice in going all out for a growth oriented budget.

Quite clearly, the finance minister had to make a choice between a high growth budget which would have resulted in a high fiscal deficit or a 'middle of the road' approach whereby lower allocations could have been made for infrastructure, education, healthcare, etc to control fiscal deficit.

The finance minister has rightly decided that under the current circumstances, where the economy needs a stimulus for the current year, the fiscal deficit has to be put on a backburner. This was evident from the fact that the allocations for all major infrastructure and core sectors are up significantly over the last year.

The Budget thus provides a clear direction with clarity of approach and purpose. As a result, while the fiscal deficit for the year at 6.8% is high, it is heartening to note that the finance minister has pledged to return to the FRBM targets at the earliest. One area of concern, however, is an increase of over Rs 40,000 crore in subsidies.

It is imperative to also look at some of the other important announcements which would have long-term impact and which unfortunately generally get ignored. These are the intent to increase infrastructure investment to over 9% of the GDP by 2014, increase of approximately 144% in lay out for employment for rural areas to nearly Rs 40,000 crore, introduction of the National Food Security Act and most important the decision to bring all BPL families under the national identity program by issuing bio-metric cards.

This would be an extremely important step in ensuring that in times to come, subsidies can be restricted only to such BPL families and not across the board. The abolition of fringe benefit tax, the clear articulation that plethora of exemptions need to be done away with, the announcement of introduction of a new direct tax code within this year and a clear statement on introduction of goods and services tax (GST) by April 1, 2010, are clear indications of the government's intent to simplify and rationalise the tax laws.

To summarise, I think the finance minister instead of wasting efforts on trivia and tinkering, has taken the right step in using the Budget to ratify the policy statements in the economic survey. The finance minister has shown the guts to take the economic bull by the horn, rather than being defensive.