First, The political compulsions : With at least four states going for elections this year including the vital Tamil Nadu and West Bengal , the finance minister had to ensure that there were no tax burden to anger the voters. As also the contributors to the political fund, the corporate sector more popularly called the India Inc.(incorporated). For the first time perhaps, the public and the corporate sector have hailed the budgets, which is definitely growth oriented – it seeks to keep the growth rate (GDP) at 9% next year from 8.6% of this year. Industrial growth is up to over 8% and generally most sectors are on the growth track including infrastructure , services, etc. The FM had an awesome job to do the balance the interests of polity and economics which he has done well drawing on his rich experience as a seasoned politician and administration.

As leading economist turned journalist s swaminathan iyer puts it in his column, its not a pyrotechnic budget and it was bereft of drama which some of his predecessors were fond of doing – making dramatic decisions gambling on certain economic indices to pay off. Pranab being a traditionalist has chosen the safe path – good since the world is still reeling from the after effects of recessionary trends of the global meltdown triggered by the lehman crisis in 2008. India and China were the only countries with high growth rates to insulate the world against the crisis.

Pranabda has seen the warning signals ahead. Crude prices are spiralling once again triggered by the massive upheaval in the arab world , Egypt, yemen, sudan, Libya, it threatens to balloon and spillover to the rest of the moslem countries worldwide (Nostradamus predictions coming true?). As in 2008, political uncertainties will result in cutback production in the OPEC countries consequently leading to a phenomenal rise in crude prices – oil pundits claim it could breach the US $ 150 mark soon and thats trouble worldwide once again.

Is that the reason that he has chosen to transfer the subsidies on POL (Petroleum, OIL , Lubricants) productions directly . Governments finances are always strained on account of three subsidies – food subsidy, fertiliser subsidy and fule subsidy ( kerosene & lpg) . |One is yet to assess what impact this will have on petroleum product prices – motor spirit, diesel, kerosene, lpg, aviation turbine fuel --.

Keeping all these developments in his mind, the FM has walked the tight rope and desisted from tinkering with the tax slabs or with the indirect taxes on various commodities. While the enhancement of exemption limits for senior citizens ( also reducing eligibility to 60 yrs from 65) to rs 2,50,000 from rs 2,40,000 , though marginal , its a very welcome move. Creating the very senior citizens category at 80 years and pushing exemption limit to rs 5,00,00 is laudable but it benefits a minority , hardly 15,000 people benefit. There is still a large section of oldies between 65 to 75 years that is bearing the brunt of the inflation , banks low interest rates and high cost of living and dwindling savings.

Innovation is the key and sparing people of paperwork is generally against the age old practice of government and bureaucracy. But Pranabda has gone where no one has gone before and has mandated the finance ministry mandarins to evolve a scheme by which people earning below rs 5,00,000 are not subjected to the drudgery of filing tax returns again in july every year. If the employer has deducted TDS, he wouldn’t need to file separate tax returns again. Good Show.

Pranab has justifiable reasons for treating the corporate sector the way he has done in the 2011-12 budget proposals. He has rightly reduced corporate tax from 7.5% to 5%, MAT increased marginally from 18 to 18.5% of book profits, expanded the scope to include special economic zones( which are booming), resisted from rolling back on financial stimulus such as retaining service tax at 10% against 12% in previous years, brought in new class of service tax providers under the net – those providing hotel accommodation at over rs 1,000 a day using AC facilities, flyers slapped an extra rs 50 per fare for domestic travellers and rs 250 for international travel, health care providers on extending checkups, treatment and diagnostics coming under service tax category.

The only hitch here is that healthcare will become costly now and the middle class will be hit badly as most of them in the private sector employment use private sector hospitals for treatment and the like. The argument is that this would encourage more people to take health insurance as the insurance provider would then have to bear the burden of service tax.

Noted agriculture scientist MS Swaminathan’s sentiments on the agriculture sector may be correct as the FM has not done anything dramatic to improve agriculture productivity which has groaned at a paltry 4% o er the years and is now marginally higher at 5.4%. Excepting farm credit and outlays there is nothing major for the farmers. But one has to remember that in previous years the government has done a lot to liquidate the debts of farmers through farm loan waivers.

There are some steps to boost the infrastructure sector – power sector has been taken care of, albeit in a small way, so that UMPPs flourish and close the gap between demand and supply. Again, concerns of the steel sector have not been addressed entirely. There are some good gestures towards the social sector when it comes to anganwadi workers, increase in outlays, rural broadband connectivity.

Assurances on aligning Director Taxes Code and Goods and Services Taxes (GST) (though some states still oppose GST, hopefully they will come around in larger national interests), promise to clear insurance and banking bills so that financial sector reforms get a further push, augur well for the economy from April 01, 2012. FDI which had started declining receives thrust as further liberalisation of FDI norms are in the offing. Auction of 3G spectrum (forget the scams that 2G generated at political and economic levels), has brought a huge amount of money, so government has no plans to indulge in market borrowing next year.

To sum up the budget , its best to use the observations of the prime minister , dr manmohan singh who said : I think this is a budget which matches the challenges that our economy faces. This budget meets all the challenges that our economy and our polity faces in the next fiscal year. We need to sustain a high rate of growth and therefore this budget builds upon the good performance of the current fiscal year’s 8.6 % growth rate to a projected 9% growth rate for which adequate provisions have been made particularly in the area of infrastructure and in social sector plus agricultural development.growth, equitable growth, inclusive growth plus a determined effort to curb inflationary expectations.

Well, The Finance Minister has done quite a lot to encourage foreign direct investment and foreign portfolio investment. He has reduced the surcharge from 7.5% to 5%. I think, the signals are that this is a government which is reform-oriented. He has promised that he will come with legislation with regard to insurance, with regard to pension fund. In totality, if these promises are converted into solid Acts of Parliament, they will provide a boost to the capital market as well as to the corporate sentiment all around.