A foot-licking budget.

It is hard to find anything encouraging to write about this year's budget which was unveiled last Friday. The entire exercise revolved round the fact that the government is bankrupt and yet has to pass the Food Security Bill, which will add another Rs 1 trillion to government expenditure, only because the Congress chief wants it. There is no thinking about consequences, no rational discussion about pros and cons, no worry about increasing deficit and inflation, just a foot-licking response to an order. This would be acceptable in dictatorships like North Korea or Iran but we are constantly reminded how democratic India is. The trouble started way back in 2008. An enormous stimulus was injected into the economy in the form of 80% increase in salaries for useless civil servants, a decrease in service tax to 10% which decreased income, forgiving of loans taken by farmers and the MNREGA scheme which paid Rs 100 ( Now Rs 162 ) to villagers for 100 days a year for doing nothing. This was done to generate a growth spurt before general elections in 2009 and was successful in that the Congress increased its number of seats in the Lok Sabha. The result of these measures was an enormous increase in government expenditure, a drop in revenue as service tax collections were less than expected and a rural wage explosion leading to soaring food prices as farmers had to pay higher wages to casual labor. The RBI was slow in reacting to rising inflation, whether due to pressure is not known. By the time the RBI started increasing rates inflation was ingrained and 13 rises have not succeeded in taming the inflation monster. Hence this toxic budget. In order to generate more revenue service tax and excise have been raised to 12.36% which will immediately add to inflation. To stimulate the Sensex, which is too high already, Securities Transaction Tax has been reduced from 0.125% to 0.1%. A desperate attempt to attract hot money and stop foreign investors from fleeing and a consequent collapse in the rupee. Mysteriously, a government scheme called Rajiv Gandhi Equity Savings Scheme will allow a 50% tax deduction for new retail investors who earn less than Rs 1 million/year, which means 99.99% of the population. They will be allowed to invest up to Rs 50,000 in the scheme which will have a lock-in period of 3 years. Is this an underhand attempt to finance disinvestment in public sector companies? The recent sale of ONGC shares was a disaster as the base price was set too high and LIC had to buy 95% of the offer. Diesel, petrol and domestic LPG prices will have to be increased soon resulting in inflation going to over 10% again. It is shocking how human beings can give up all self respect and turn into spineless creepy crawlies just to get some post. No sharam, no izzat.