Economics & Politics Ka Haal Bura...

INDIA is getting into the shoes to handle newly budget presented by our finance minister sh. Pranab Mukherjee.But Many Question Arises,what will happen to fate for our country?Basically,its politics and economics which governed any country's future outlook.so with watching budget on tv and discussing with my friend
{joni panwar} I came to know bad fortune for our upcoming years.In view of that please go through this compliation from newspaper which would be very beneficial,input from yashwant sinha{ex. finance minister}.

Unprecedented events have taken place in Parliament over the last two days. The first was a discussion on price rise even before a discussion on the motion of thanks for the President’s address was taken up. The second was the finance minister intervening in that debate and putting forth his views on price rise a day before he was due to present his Budget. The third was the walkout by the entire Opposition midway through the finance minister’s speech in protest against what he was proposing in the Budget. Clearly, we are passing through difficult times.

Every Budget is prepared in the context of the economic situation prevailing at that time. The most important challenge facing the finance minister this year was the unprecedented price rise of essential commodities including foodgrain and a wholesale price index threatening to go into double digits. The two other challenges before him were of reining in the ever-increasing fiscal deficit and stepping up the growth rate of the Indian economy. While these three challenges are no doubt interlinked, they are also in contradiction with each other and the finance minister had to use all his skills to harmonise them. Unfortunately, Mr Pranab Mukherjee has failed to do so.

Everyone agrees, including the finance minister himself, that what drives the Indian economy is domestic demand and domestic savings. If the Indian economy has to prosper, we must ensure that prices are controlled so that consumers are attracted to spend money. Second, there must be money and cheap money in their pockets to buy. Only then will the consumer buy. Both have been adversely impacted by this Budget.

The agrarian economy is in a crisis. There is precious little for agriculture in this Budget. So, the agrarian crisis will continue. The impact of the loan-waiver scheme has already spent itself. The increased allocation for NREGS is limited to Rs 1,000 crore only in this Budget, less than what it will lose by way of inflation. Demand from the rural sector, therefore, is not likely to increase dramatically.

As far as the industrial economy is concerned, its recovery is still fragile. As the Economic Survey notes, there was strong growth in consumer durables and intermediate goods, moderate growth in basic and capital goods, and sharp deceleration in consumer non-durables. A double-digit inflation will threaten this fragile recovery.

Interest rates in the economy are already firming up. This will make money expensive and will act as a deterrent to consumption growth. According to the Economic Survey, the percentage growth in per-capita consumption, after touching a high of 8.3% in 2007-08, declined to 5.4% in 2008-09 and further to only 2.7% in the current year. Gross domestic savings have declined from 36.4% in 2007-08 to 32.5% in 2008-09, a massive drop of nearly 400 basis points in a year.

Public sector accounts for a decline of 360 basis points out of this total of 400. Growth in credit for industry and for personal loans and services has actually decelerated as compared to last year. The Indian consumer is still wary of consuming more. This Budget will be a further disincentive for him.

It is in this context the increase in central excise duties, coupled with the increase in petroleum product prices, has to be seen. Controlling fiscal deficit was no doubt a challenge. But, having taken the fiscal deficit to unprecedented levels, the finance minister could tackle it only gradually. Mr Mukherjee should have chosen one of the two options: partially rolling back the excise duty concessions extended in the past or raising petroleum product prices. It is a combination of these two that makes the prescription deadly.

It is not going to do any service to the economy. What the FM has done in this Budget, therefore, is neither good economics nor good politics.

Source:EconomicTimes(Yashwant Sinha)