Union Budget 2012-13 is no tonic for a slowdown-hit economy

Not a bang but a whimper. That best describes Budget 2012-13. Granted, a government in defensive mode - under siege from allies and adversaries alike - wasn't likely to produce fireworks. But surely bold fiscal consolidation was the necessary trade-off for a no-can-do on reforms. Finance minister Pranab Mukherjee projects economic upswing, starting with 7.6% growth in 2012-13. But high-trajectory growth can't sustain in a vacuum, unless we're to believe an economy on auto-pilot substitutes for policymaking.

Though it'll make everything from travel and hotels to ACs and cars costlier, the Budget feebly tries to please. It raises the upper limit of the 20% income tax slab, ensuring a Rs 22,000 saving in this bracket. But taxpayers reeling from inflation would've cheered had the basic exemption limit hit Rs 3 lakh, instead of the Budget's timid Rs 2 lakh from the current Rs 1.80 lakh. Budget at ET: Budget 2012 | Union Budget | Live Union Budget Blog | Railway Budget 2012 | Budget News | Economic Survey of India If the status quo on corporate tax brings relief, industry needed more given nose-diving private investment. While corporates can access lower cost funds, the government's huge borrowing programme means monetary policy won't soften, and less credit for private players. Also, the move to amend the Income Tax Act to retrospectively tax cross-border transactions will hit investor sentiment. Balance the direct tax giveaways with the inflationary impact of taking excise duty and service tax to 12% from 10%. If these fiscal stimulus concessions weren't revoked last year when the economy was chugging along, why strike when it's losing steam? Courtesy inflation , we live with high interest rates. Yet the excise duty hike will push up prices of manufactured goods, from food items to consumer durables. Overall, we remain clueless on when path-breaking tax reform - GST, DTC - will roll. Though this year was the deadline for both, it now seems a much-needed common market and better tax administration can wait. Saddled with a high fiscal deficit, the FM tinkers at the margins instead of slashing wasteful subsidies. If full price decontrol for diesel or urea wasn't possible politically, a calibrated approach surely was. More so, since Mukherjee has pledged to fully provision food security. Merely promising to computerise the leaky PDS won't do as logistical back-up for this mammoth scheme. Mukherjee does commit to better targeting of subsidy beneficiaries via UID, and alternative delivery mechanisms. But mum's the word on how central subsidies will fall to 2% of GDP sans actual subsidy rationalisation benefiting end-users instead of intermediaries, or broader

reforms. This, despite the fact that fat subsidy bills crimp spends on education, health and infrastructure. Investment in modernising agriculture will be hard to come by, since the FM says multibrand retail FDI is to depend on elusive political consensus. And, minus commitment to labour reform, the national manufacturing policy's jobcreating aim won't fly. The Budget's limited positives include reduced STT, higher foreign loans for airlines, housing and power, as well as incentives for infrastructure funding. This isn't enough to fuel investor feel-good . Budget 2012-13 is no mood-enhancer , let alone game changer. It plays too safe, having the feel of a tail-ender's knock in the UPA's innings.