The Indian Budget for Dummies

Fiscal deficit, capital expenditure, gross domestic product, wholesale price index, excise duty...if you are like me (i.e. stumped by economic jargon), its likely that the Finance Minister's annual Budget speech leaves you reeling. Not because the fiscal deficit is rising or the gross domestic product has failed to deliver, but because of the onslaught of economic terminology bombarded at you. And if you are sitting with a bunch of economists listening to the Budget (again like me), its almost guaranteed that you'd feel like the world's greatest dummy! While people around you are making seemingly brilliant wise cracks about the Budget, you are desperately trying to remember the definition of Gross Domestic Product learnt during school economics classes some 15 years back.

So here's the Budget highlights for dummies:

a) More salary (yay): Not because your boss suddenly thinks you are brilliant but underpaid and decides to hike your salary but because the Finance Minister thinks you should get more money (the reason might just be a tad more complicated than the sudden illumination about your brilliance). And if you are a woman or a senior citizen you get to take home even more money!! Muah to Chiddu-:P

b) Debt relief (balle balle for farmers): The FM decided that farmers are special. Now what does that mean in budgetary terms? It means that you get to take loans from banks and the government repays them for you! Of course the FM seems to have forgotten that most farmers in India don't actually take loans from banks because of all kinds of procedural hassles...they take loans from money lenders who charge them exorbitant rates of interest. The actual people who take loans from banks are not the ones committing suicide since they are the relatively well off farmers. While I'm no economist (understatement of the year), even I can see that there is a logical fallacy in this. The people who are happy (other than the farmers who never paid back their loans) are the banks because they get their money back in full. And the most unhappy among the farmers would be the ones who foolishly scrapped and scrimped to pay back their loans. This, I think, is a textbook case of populism.

c) National Rural Employment Guarantee Scheme (NREGS) gets universalised: The universalisation happened before. The Budget had to fund it. How did it do so? It went and stopped all other employment schemes and put in that money with a little extra into the kitty of NREGS. Now, I'm a little confused about the whole idea of employment generation through this scheme. While I am all for dignity of labour and right to employment, it seems a little self defeating to restrict the scheme's funding to unskilled labour. Essentially, what happens is there is money for people to dig up places but the moment a little more skilled work is required (which you would need if you are serious about building even the most rudimentary of things), the funding dries up (the Act stipulates the ratio of wage cost to material cost should be a minimum of 60:40. So proportion of funding for materials and skilled labour has to be less than cost of wage of unskilled labour!). Wow!! Even my non-economics oriented brain can see that this is not going to work. Also, given the level of corruption, these elaborate schemes are just a drain on tax payers money. Why doesn't the government use the money to provide better education and infrastructure so that the poor can acquire the skill to get employed and not remain at subsistence level??

This is all for now folks! Will write more later.