The Budget announcements have been made. The finance minister changed the tax slabs giving more money in the hands of the people. However, he also hiked duty on petroleum leading to a fuel price rise.
The entire Opposition walked out of the Lok Sabha in protest terming the Budget 'inflationary'.
What effect will the Budget have on food prices? And on prices of other things? Has the FM given with one hand and taken away from the other?
In an hour-long chat on rediff.com on Wednesday, economist Siddharth Shankar replied to many such queries. Here is the transcript:
Monu asked, Your comments sir about the budget...will it lead to further inflation?
Siddharth answers, at 2010-03-03 11:55:52Hello ! I do not think the budget will lead to a substantial increase in inflation but it will surely have an impact on pushing the prices higher.
Jay asked, Sir, both the FM and PM have refused to roll back petro prices. In the long run will it do the country any good?
Siddharth answers, Hello ! I think yes it is good that they are not rolling back the prices. We are in a market economy and the prices must be governed by market forces. Why should the poor of this country pay to run cars?
Som asked, Does it make sense to divest states in profit making PSUs?
Siddharth answers, Hello ! It depends on what is being divested. Personally I feel that while privatisation is good, government must keep to itself or be a part of some critical industries.
Mohan asked, While the taxpayer may have a little extra cash at hand, most of it will drain coz of high prices of essential goods. So how good are the Budget proposals?
Siddharth answers, Hello ! You are right, the disposable income is not going to rise much but the FM has ensured that the average household feels a little lesser pich of the rising prices.
alok asked, Fd rate may increase in next 2 to 3 month
Siddharth answers, Hello ! I have my doubts if the FEd will raise rates in the next 2-3 months. The recovery is still stimulus based.
Jagan asked, Whay are the prices touching the sky? Who according to you is to blame? Has the govt taken the right steps to arrest it?
Siddharth answers, Hello ! the prices are going up due to supply side constraints. Any measure that the government takes will not yeild immediate results, it is a long drawn process. I think the government is realizing the importance of agriculture in our economy and is taking steps to improve agri productivity.
Bunty asked, If it si going to fuel more inflation, how will it bring down fiscal deficit?
Siddharth answers, Hello ! Fiscal deficit can be brought down by reducing expenditure. Let us just not depend on the government to do it, we as a citizen have a role to play in reducing deficit, to put it simply if I stop wastage, I save for the economy and thus the deficit.
GaneshNadar asked, The budget is meant to kill the common man and solve India's population problem
Siddharth answers, Hello ! I think with the cosntraints of the FM he has tried to do the best he could. Population is a social problem and I feel education is the best way to solve it and we have seen allocations to educations going up.
abhimannu asked, Has the govt done the correct thing by alloting only Rs 1,47,344 crore for the defence sector?
Siddharth answers, Hello ! Defence is a subject that the government would know the best. It depends on lot of factors and thus it would be in-appropriate to comment on it knowing only part of the whole scenario.
meetbasu asked, In this Budget,Finance minister wants to bring down the fiscal deficit to 5.5% in fy2010-11,which was 6.8% in fy2009-10.Therefore the government borrowings is also lower than what it was expected. Growing @ the rate of 7.2% at the cost of fiscal deficit of 6.8% for the fy2009-2010.How you substantiate this? Do you thing India is on right track of development?
Siddharth answers, Hello ! At this juncture, it is important for the economy to grow, not only from the point of of figures but also from a social perspective. Deficit can be taken care off once the economy has enough reserves. I have a lot of faith in the Finance Minister and he is trying to move in the correct direction.
Bhabani asked, As an economist what is your take on India's SEZ and land acquisition policy?
Siddharth answers, Hello ! I think we have vast areas of land in Rajasthan on which crops cannot be grown, thus, I think land that cannot be cultivated should only be acquired for the industry or SEZ. Agri is going to be critical for India and thus we should not let even an inch of cultivable land be acquired.
sriram asked, Typically the interest rates have to be atleast 2% more than the inflation rate. However if you look at the interest rates they are atleast 0.5% less than inflation Why is the government so keen in having free flow of money ?
Siddharth answers, Hello ! Government wants people to borrow and use it so that activity in the economy can be generated.
Paresh asked, Pranabda extended the repayment period of farmers' loan by six months, and he cited drought and floods, yet there is no end to farmer suicide. How musch is the government's faulty irrigational policy is to blame for this
Siddharth answers, Hello ! Till about 15 years back we as an economy did not have money to build canals, it is only now over the last 5 years that we have funds. For irrigation we need water, the way we are becoming a consumption economy, forget water we will be short of all natural resources. Thus I would want the India gets back to a saving economy, things will automatically start falling in line.
GaneshNadar asked, whats the difference between inflation and pushing the prices up
Siddharth answers, Hello ! Inflation means increase of prices.
srini asked, Is the global crisi behind us?
Siddharth answers, Hello ! Iam not sure if it behind us. The recovery is still in its nacent stage and is stimulus driven.
kcjena asked, What are the benifits the corporate sector get from the new budget.
Siddharth answers, Hello ! I think the immediate benefit I see is the increase in disposable income that the consumer would have, reduced surcharge and most importantly a status -quo on the policies of the govenment.
Joby asked, What are basic diofferences between India and China...when the latter is a manufacturing superpower...we are nowhere near them...yet we too have good and abundant labour
Siddharth answers, Hello ! China is a manufacturing hub and India is a service hub. We both excel in areas that are different. We as a country will need to get more diciplined and trust me we can surpass China.
budgetpadmanabhan asked, sir, can you predict the fluctuation of US$ & EURO for the next couple of months
Siddharth answers, Hello ! I feel that euro has depriciated a lot over the last few weeks and we should see some kind of a rebound in $-Euro or $ sterling. This weakness that we may see in $-Euro may not get reflected in Asian currencies
Gopal asked, Sir, this is not Budget related....but I would like to know the answer...in layman's words...how does a country decided how much money it can print?
Siddharth answers, Hello ! It decided by how much excess money you have spent over your income.
avru asked, Which sectors is going to perform verywell? thnks
Siddharth answers, Hello ! Every sector has a potential to perform well. To my understanding Pharma and education would do the best in the long run.
Sam asked, Why is Yen always calculated against Rs 100, while the other are aginst Re 1?
Siddharth answers, Hello ! if they say 1 yen, it will come to appx 50 paise.
budgetpadmanabhan asked, sir, why no special attention for textile industry/yarn in every budget?
Siddharth answers, Hello ! We have interest subvention given to exports and textile is an export oriented sector.
budgetpadmanabhan asked, sir, is this budget a goodone for our economy or not
Siddharth answers, Hello ! Yes, the budget is good for the economy. We have seen partila roll backs in various sectors.
Dayal asked, Do you belive in the GDP figures of China?
Siddharth answers, Hello ! Let us start looking at increasing the GDP of India by increasing effeciency and we will surpass the figures of China, whatever they may be, right or wrong.
Tamilselvan asked, I strongly oppose the money wasting NREGA programs in villages. Huge 41000 cr rupees is thrown to the village people not to work in agriculture. It'll reduce around 40000 cr rupees to our gdp from Agri. So totally 1 lack crore wasted and prevented to our GD.
Siddharth answers, Hello ! NREGS as a concept is good and the government is working towards its effecient delivery. look at it from a social perspective and not from the perspective of pure figures. Average landholding in india is falling versy fast and we need programs like NREGS
Riticka asked, hi, what is your take on increasing prices. any solution?
Siddharth answers, Hello ! Simple solution - increase production and reduce wasteful consumption.
budgetpadmanabhan asked, sir, in the earlier conversation you have opposed the roll back the fuel prices, but to my opininon hike in the fuel price lead to rise in price for all the commodities which leads to suffer for poor. can you please explain
Siddharth answers, Yes, the prices rise but if the government subsidises beyond a point it leads to deficit and that leads to rise in prices. By raising prices the possibilty of consumption falling is there which may ultimately lead to lower prices.
Raja Krishna asked, How do you think the budget has addressed the problem of rich poor gap which is widening at a fast pace?
Siddharth answers, Hello ! Rich poor gap gets narrowed by education and the FM is definitely pushing education.
Priyanka asked, anything special in budget for students
Siddharth answers, Hello ! To my understanding there is nothing special for students except more allocation to education