The New Nation - Internet Edition

BUDGET formulation in the present volatile national and international economic climate involves tightrope walking. The budget framers are limited in their actions by inadequacy of funds. There are too many sectors competing for scarce funds. In this situation, hardly the sectoral requirements can be fully met. The proposed budget for 2008-9, thus, could not be devoid of these aspects. However, the budget has broadly met the expectation of important stakeholders, specially the business groups. They have praised the budgetary proposals for reducing direct taxes such as corporate tax and for fiscal measures like reducing duties on imported raw materials and capital machinery while raising tariffs on imported finished products.

Thus, the businesses have generally called the budget business-friendly likely to encourage investment and greater production activities while also giving better protection to local industries. Businesses generate a lion's share of the revenue for the government and their being happy can be a major factor in reaching revenue collection targets. Expansion of social safety nets, creation of guaranteed employment for the poor, retention of high level of subsidies on food and fuel that impact on the costs of living of the poor have been commended.

This is for the reason that government's borrowing from the banking system will be higher in the next fiscal to maintain these spending on largely charitable and consumptive activities and for subsidy. Thus, the biggest challenge is to ensure that the government's borrowing does not lead to reduction of credit to the private sector. Furthermore, completion of the Annual Development Programme (ADP) must be aimed at. As it is, the huge size of the budget, the provision for ample spending on it because of the election, will mean further rise in inflation. Monetary policies will have to be expertly applied to keep this inflation as low as possible.