Budget 2012: Will the Finance Minister do a balancing act to boost growth?

CNN-IBN
Mar 16, 2012 at 10:04am IST

New Delhi: Finance Minister Pranab Mukherjee is all set to present the Union Budget in Parliament on Friday. This will be his seventh and it comes against the backdrop of slowing growth and burgeoning fiscal deficit.

The government will have to do a balancing act, by raising taxes and at the same time giving incentives to boost investor confidence. A balancing act is needed in a bid to spur growth.

There are indirect taxes that pinch the common man. It remains to be seen whether the Finance Minister will change the income tax slabs and change the saving exemption limit. Sources say the tax exemption limit is likely to be raised.

Economic growth has slowed down and so it will be a tough task for the Finance Minister.

A big question is whether Pranab will go for big ticket reforms or will political compulsions force him to go for a diluted budget.

The markets are expecting the Finance Minister to go for fiscal consolidation. There is a need to bring fiscal deficit under control. A cut in wasteful expenditure is also required.

The markets also want deregulation of diesel prices. A hike in petrol prices may also be on the cards.

The Finance Minister is expected to push for reforms. Infrastructure bottlenecks also need to addressed.

Chief Economic Advisor Kaushik Basu, who presented the Economic Survey on Thursday, said the Indian economy has some fundamental strengths, but a few reforms are really needed.

Will political compulsions prevent the Finance Minister getting a grip on finances?

Railway Minister Dinesh Trivedi has had to face flak from his own party after he announced a hike in passenger fares while presenting the Rail Budget 2012.

If the UPA allies do not allow a fare hike, it remains to be seen whether they allow Pranab to cut fuel subsidies.

Another big question is whether such political interferences will deter the Finance Minister from going for controversial reforms.

Not just the Opposition, but the UPA allies have also been opposing reforms like FDI in retail.

Experts feel political pressure will prevent the Finance Minister from taking bold decisions in Budget 2012. Speaking to CNN-IBN, Economic researcher Srivatsa Krishna said, "I'm not positive about the Finance Minister taking bold decisions and going for controversial reforms this Budget."

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