I couldn't stop myself from writing about the reprehensible budget Mr. Pranab Mukherjee presented few days back, so here i go. One of the first facts that came out was that the expenditure touched Rs.10,00,000 crores for the first time in Indian History, now that's a huge sum of money. The irony is that despite of such magnanimous spending, India is still a developing country and to add to it,India is still a country of the poor(I wonder where all that money goes!).
The Fiscal deficit increased to 6.8% of the GDP. Now, for a country that spends at least 10lac crore Rs., 6.8% of the GDP is not just huge but massive,not just massive but dangerously massive. For all those who find these terms and the budget to be simply inscrutable, let me make it clear; When a country spends more money than it earns the gap that is produced is called the deficit. The fiscal gap measures the difference between government spending and revenues over the very long term, typically as a percentage of Gross Domestic Product. The fiscal gap can be interpreted as the percentage increase in revenues or reduction of expenditures necessary to balance spending and revenues in the long run.
Coming back to the point, such a big fiscal deficit needs to be corrected asap and measures need to be taken to curb expenditure and increase revenues. But, what Pranab Mukherjee declared in the budget was an increase in expenditure which many found to be unnecessary and uncalled for. For example, the expenditure on NREGS( National Rural Employment Guarantee Scheme) was increased 150% to Rs.39000 crore. The Implementation of the same scheme happens to be done haphazardly and when measures need to be taken to properly implement that, the Government simply increased the expenditure!!( Now that's where all the money goes.)
Japan too had faced such a situation earlier in 2002 when its fiscal deficit was around 8.2% of the GDP in 2002. But, the government in Japan controlled the tax( of course increased it to increase revenue) and reduced unwanted expenditure, and was able to reduce that gap to 4%. But even that took a lot of efforts and more importantly 6 long years! But in India,the Congress Govt has only 5 more years!( I wonder what they'll do if they lose the next elections!)
But Indian government instead of adroitly controlling the taxes and expenditure has simply ignored the taxes(in fact increased tax exemptions for many), and increased expenditure , No No No, not on infrastructure or health facilities, but on Schemes!!!( That's exactly where all the money goes.)
The Stock market's response has been directly proportional to the Budget performance. The response was BAD. It has been on a bear run for a week now. Expected, as there was nothing that the Budget said for them. The Budget literally ignored them. No wonder why the response was so apoplectic.
Interestingly, the only part of the budget that had some reductions in prices was LCD tv, Gold and mobile phones. I wonder how that would help the poor in India for whom the budget was primarily meant for this year.
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