More about India's 2010 budget.

In the budget presented to the Parliament on Feb 26th, Mr Pranab Mukherjee projected revenues in the coming year from disinvestment of PSUs to be around Rs 40,000 crores and from auctioning of 3G licenses to be around Rs 35,000 crores. Together they add up to Rs 75,000 crores or about 1.1% of the GDP. These are very optimistic projections indeed and are based on a favourable economic and political climate, abundant risk taking by industrialists and strong foreign investment inflows.

It is quite possible that Mr Mukherjee's optimism is justified and may well turn out to be true. But the global economic recovery certainly looks fragile at the moment, expecially in view of the huge budget deficits in many developed countries and pressure to bring them under control quickly if not immediately. Look at what is happening in Europe. And it is quite evident that the global economy has still not returned to normal. India as we saw towards the end of 2008, is very much a part of the global economy. Under the circumstances, what is really inexplcable on the part of the Finance Minister is to give away about Rs 26,000 crores to the middle class by widening the income tax slabs. In my earlier blogs, I mentioned that salaried professionals like us have benefited from this move. But is it really good for the economy? Could Mr Mukherjee have not maintained the status quo if he was so serious about fiscal discipline?

Clearly Mr Mukherjee was more intent on playing to the galleries than on taking tough measures that would be good for the economy in the long term.