India Budget – 2012: One Step Forward and Two Steps Back

Abstract

India is home to 1.21 billion people, which is about 17.4% of the global population. However, it accounts for only 2.4 % of the world GDP in US dollar terms and 5.5 % in purchasing power parity (PPP) terms. Hence there exists a huge potential for catch up. This is evident from the fact that it took 40 long years from 1950-51 for India’s real per capita GDP to double by 1990-91. But 1990-91 was a defining moment in India’s modern economic history as a severe balance of payments (BoP) crisis prompted far-reaching economic reforms, unlocking its potential growth. As a result, in only 15 years, India’s per capita income doubled again by 2006-07. If the current pace of growth is maintained, India’s per capita income could further double by 2017-18 in next five years. While acceleration in India’s recent economic growth is noteworthy, maintaining the pace, no doubt, will be challenging.India’s economy is big and getting bigger. Liberalisation of government regulations and a deliberate strategy on the part of the Indian Government to promote infrastructure spells opportunity for impressive economic development in India. Nearly all of the infrastructure sectors present excellent opportunities, with roads and highways, ports and airports, railways and power standing out as particular bright spots. The Indian economy is booming, with rates of Gross Domestic Product (GDP) growth exceeding 8% every year since 2003-04. This ongoing growth is due to rapidly developing services and manufacturing sectors, increasing consumer demand (largely driven by increased spending by India’s middle class) and government commitments to rejuvenate the agricultural sector and improve the economic conditions of India’s rural population. The preamble of our constitution starts with saying WE….THE PEOPLE, who are always under the mercy of the political leaders and bureaucrats, so-called “Kalyug ke Bhagban (God of Modern Age)”. They really decide our lifestyle and lifespan. Their every word becomes a new modern veda for WE…THE PEOPLE. So, here Budget is a part of that. I would like to begin by laying out a simple framework, which would be able for to give justice to my delivery on the discussion on budget 2012. My discussion today is all about to outline (i) some important highlights of budget speech, (ii) tax slabs for WE….THE salaries PEOPLE, (iii) Budgetary allocation to some key sectors of the economy, and Followed by (iv) Budget impact to India Inc., Capital Market, Economy.