The budget proposed by India's finance minister on Friday failed to satisfy anybody, which is becoming a recurring problem for the beleaguered United Progressive Alliance (UPA) government.
If you're really keen on the nuts and bolts, the Wall Street Journal's team of bloggers have picked it apart in a series of posts on the paper's India Realtime site.
But the gist of the response was captured by the benchmark index of the Bombay Stock Exchange, the Sensex, which reversed early gains to drop 1.4 percent on the day. (This after my financial adviser told me confidently that the new budget nearly always results in a spike in the index).
India's Hindu newspaper, which can be counted on to adhere to the staid journalistic prose of the 1950s, described the proposed financial plan as “a mix of sops and imposts,” including a marginal rise in the standard income tax exemption and a 2 percent hike in service and excise taxes.
The finance minister left corporate taxes and peak customs duty unchanged, but hiked sin taxes on stuff like cigarettes and gold bars and imported cars – with the net result that the treasury will gain about $8.3 billion in added revenue. (Wake up!)
So why were both big business and little guys disappointed? For regular folks, the marginal increase in the standard tax exemption hardly makes up for runaway inflation. And for India Inc., the failure to deliver any significant economic reforms or big commitments on reducing the ballooning deficit came as a major disappointment.
As one chap told Reuters, "I don't see any populist schemes, but this is not a reformist budget either, it is a status quo budget."
The problem is that the status quo is sinking economic growth figures, persistent inflation, and a (mostly) deteriorating rupee exchange rate.
The finance minister set a fiscal deficit target of 5.1 percent of GDP for the fiscal year that begins in April, down from an expected 5.9 percent in 2011/12, Reuters reported.
But the current year's deficit ended up far above the 4.6 percent originally targeted by the government in its budget a year ago, it increased spending despite flagging economic growth, the news agency said. Moreover, even if India somehow succeeds in capping the deficit at 5.1 percent, which several analysts doubted, “India's fiscal gap is wider than those of its BRICS peers: Brazil, Russia, China and South Africa,” Reuters said.
For example, India's best-case-scenario deficit is more than four times Brazil's estimated 2012 budget gap of 1.2 percent of output, the agency said.