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India’s new budget isn’t big on new ideas, but it’ll do for now

India’s finance minster toed the delicate line between populism and economic reforms in presenting his budget today. While there were unwarranted expectations that the budget would be a veritable goodie bag of subsidies and freebies with an eye on the general elections in 2014, realistically that was never going to be true. The Indian economy is groaning under a fiscal deficit of $86.5 billion so far this year and the government is forced to focus on limiting that to 5.2% of the GDP.

The minister announced small welfare schemes, mostly targeted at small minority groups. Education, which was identified as a crucial sector, has got some additional outlays. There is also a move to tax the super rich, people earning higher than $200,000 a year would have to pay an additional tax surcharge of 10%. But income disclosures are still poor and a laughable number of 42,800 people qualified as super rich last year.

Stock markets tumbled though, based on the fact that the budget lacked any “big ideas” and that no measures were announced to make the country more attractive as an investment decision. But the rational view, however, is that the economy has bottomed out. GDP for the October to December quarter is 4.5%, the lowest in a decade. Estimates suggest that the GDP for this year, April 2012 to March 2013, is likely to be 5%. However, a survey of the economy (which is traditionally presented a day before the budget) pegs growth for next year to be 6.1 to 6.7%. The government is hoping this will provide the requisite “feel good” when elections come around.

Here is the full text of the budget speech.

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