To hit the targets, the FM has taken the bold steps like increase in the standard rate of excise duty and service tax from 10% to 12%, new proposals to strengthen investment, announcing Rs 60,000 crore towards issuing tax – free infrastructure bonds, allowing external commercial borrowings to finance power and highway projects, and maintaining subsidy at 2% of GDP.

India’s economic slowdown is mainly due to poor industrial growth, together with a decline in fixed capital investment. The fixed investment in the country dipped down from 32.9% of GDP in 2007 – 08 to 29.2% of GDP in 2011- 2012. The supply of savings to finance both government and private sectors investment has to increase. Currently, the total savings amount to only 13% of the GDP whereas the total requirement is around 15%.

The increase in the fiscal deficit from 4.6% in 2011 – 2012 to 5.1% in 2012 – 2013 is mainly due to the revenue decline and increase expenditure. The former is caused by slower economic growth and the latter by fuel subsidies. The FM would bring the fiscal deficit to 5.1% by keeping subsidy to not more than 2% of the GDP. Subsidies are estimated to decline from Rs 2, 16,297 crore in 2011 – 12 to Rs 1, 90,015 crore in 2012 – 2013. The increase in the tax exemption limit will enhance domestic spending though there will be a loss in the revenue. To bridge the fiscal deficit, the FM aims to raise an amount of Rs 1, 06,338 crore from customs, excise and service tax. However, it is doubtful that the FM will be able to raise this amount from indirect tax. A jump in excise duty and service tax by 2% will definitely increase the price level and thereby reduce demand. One good thing that this budget has done is the introduction of a negative list which includes among the few, the services rendered by the government, the RBI, education and health care. Besides, the Budget has proposed concessions in the form of reduced taxes on external commercial borrowings from 20% to 5% for fertilizer, roads, railways, bridges, construction and civil aviation sectors.

One good thing that this budget has done is the introduction of a negative list which includes among the few, the services rendered by the government, the RBI, education and health care.

Agriculture, being the primary occupation of two – third of the population, has received special attention in this Budget. Agricultural credit target is fixed at Rs 5, 75,000 crore, a jump of Rs 1, 00,000 crore over 2011 - 2012. Irrigation, dams to be eligible for special funding. The Budget has earmarked Rs 300 crore for irrigation programme. The FM has allocated Rs 9,217 crore to the state schemes of Rashtriya Krishi Vikas Yojana, and an amount of Rs 18, 215 crore to crop production. The FM has revealed a plan of creating additional storage capacity of 2 million tonnes in the coming year. In the agricultural front, the FM has also allocated an amount of Rs 1,780 crore for a number of programmes including food security, plant protection, crop insurance, flora and fauna, and development of maize and pulses. Rs 3,220 crore is allocated to agricultural research and education. It is hoped that with all these measures we can see a growth rate of 3% in the agricultural sector.

India’s health sector is growing at an annual compound rate of 15%, and is expected to reach $250 billion by 2020. The Twelve Five Year Plan envisages that the government’s healthcare spending will increase from 1.9% to 2.5% of GDP.  Under the NRHM programme, the FM has allocated Rs 20,822 crore against Rs 18,115 crore in 2011 – 2012. However, the focus given to healthcare sector is not sufficient. There is a huge gap between the available infrastructure and the demand for it. Furthermore, India suffers from lack of skilled medical professionals though the country has the largest number of medical colleges in the world.

The FM has provided Rs 11,937 crore for mid – day meal scheme, Rs 25, 555 crore for the Right of Education. In the Rajiv Gandhi Rural Drinking and Sanitation scheme, Rs 14,000 crore is earmarked for 2012 – 2013, and an amount of Rs 3,915 crore for the National Rural Livelihood Mission. Rs 15,588 crore will be infused to public sector banks and Rs 10,000 crore to NABARD for financing RRBs. The outlay under National Backward Region Grant Scheme is fixed at Rs 12,040 crore, a jump of 22%. The controversial MGNREGA has been provided Rs 33,000 crore.

The Budget 2012 has no special package for the North Eastern Region except for the Rs 500 crore pilot scheme for geo - textile cluster in Nagaland and Mizoram. The NEC allocation has increased only from Rs 633 crore in 2011 – 2012 to Rs 691 crore in 2012 – 2013. DONER has been allocated Rs 1000 crore under the Bringing Green Revolution of Eastern India.

With all the measures incorporated in the Budget 2012 – 2013 to step up the growth rate and to maintain economic stability, the question is: Is the Budget 2012 - 2013 benefits the poor? Or is it widening the gap between the rich and the poor? The hike in excise duty and service tax is going to push the prices up and the tax incidence will fall more on poor consumers. Special products have to be launched for the rural markets where the extreme poor can purchase at a lower price. With the launch of the new PDS, it is expected that the new scheme will pave the way for more items in its basket. Monitoring cells have to be set up to monitor and evaluate the crore of rupees injected into the economy by the government under different schemes and programmes to reduce leakages. It is the need of the hour for the government to be serious and be innovative in its approach to bridging the gap between the rich and the poor.

Prof. Natalie West Kharkongor,IIM Shillong