Last year's budget: promises UPA didn't keep

R Jagannathan

When finance minister Pranab Mukherjee reads out his budget speech shortly, he will promise many things. But, invariably, he will not deliver on some of them. He would also have got several things wrong. So, it is always good to take his forthcoming budget promises with a pinch of salt.

Here’s a laundry list of the things he promised in his budget speech of February, 2010, which he failed to deliver during the subsequent year. His promises are followed by moneycontrol.com’s assessment of how he fared.

PROMISE ON INFLATION: A major concern during the second half of 2009-10 has been the emergence of double-digit food inflation. Government is acutely conscious of this situation and has set in motion steps, in consultation with the State Chief Ministers, which should bring down the inflation in the next few months and ensure that there is better management of food security in the country.

PERFORMANCE – FAILED: Inflation continues to rage and food price inflation remains in double-digits. The normal winter fall in vegetable prices was barely noticeable. The Economic Survey says average inflation remained at 9.4 per cent and 11 per cent during April-December, 2010, in terms of the Wholesale price index and the Consumer price index respectively.

PROMISE ON FISCAL PRUDENCE: Honourable Members will agree that fiscal policy has to be guided by the required framework for fiscal prudence. In the Medium Term Fiscal Policy Statement presented along with Budget 2009-10, I had laid down a road map for fiscal deficit. I am happy to report that in keeping with my commitment, I have been able to present the Budget for 2010-11 with a fiscal deficit of 5.5 per cent. In the Medium Term Fiscal Policy Statement being presented to the House today, along with other Budget documents, the rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per cent for 2011-12 and 2012-13, respectively.

PERFORMANCE – EXCEEDED, BUT...: The Economic Survey says that the actual fiscal deficit will be 4.8 per cent - which is the target for 2011-12, next year. But this is no thanks to government prudence. What happened was that high inflation inflated the GDP topline, helping shrink the fiscal deficit in relative terms.

PROMISE ON DIRECT TAX CODE: I am happy to inform the Honourable Members that the process for building a simple tax system with minimum exemptions and low rates designed to promote voluntary compliance, is now nearing completion. On the Direct Tax Code the wide-ranging discussions with stakeholders have been concluded. I am confident that the Government will be in a position to implement the Direct Tax Code from April 1, 2011.

PERFORMANCE – FAILED: The Direct Tax Code is not going to happen till 2012-13, and even that will be a much diluted one, with none of the radical measures proposed in the original draft being adopted.

PROMISE ON GOODS AND SERVICES TAX: It will be my earnest endeavour to introduce GST along with the DTC in April, 2011.

PERFORMANCE - FAILED: There is no chance it will happen this year since states are unhappy with the compensation offered by the Centre for adopting GST.

PROMISE ON BANKING REFORMS: The Indian banking system has emerged unscathed from the crisis. We need to ensure that the banking system grows in size and sophistication to meet the needs of a modern economy. Besides, there is a need to extend the geographic coverage of banks and improve access to banking services. In this context, I am happy to inform the Honourable Members that the RBI is considering giving some additional banking licenses to private sector players.

PERFORMANCE – NOTHING DONE SO FAR. We have seen talk and more talk, but no licences have been issued to anyone so far.

PROMISE ON GOVERNANCE: The UPA Government has made a serious attempt to create an environment that supports transparency and accountability in the working of the public institutions in the country. As Honourable Members are aware, a number of legislative and administrative measures have been taken in this regard.

PERFORMANCE – MISERABLE FAILURE: The Commonwealth, 2G, and CVC controversies show that governance has been the last priority for the UPA government.