Amit Bubna, Professor of Economics and Finance, Indian School of Business

The 2006-2007 Budget presented by the Finance Minister correctly emphasizes the role of the social sector for economic progress. Therefore, the Budget provides funding for important services such as drinking water, sanitation, education, agricultural insurance, farm credit, among others. These are more than just populist measures, though it may be a side benefit. These measures should help in including the rural sector in the country's economic growth.

Increased FII participation in the capital markets is welcome, particularly given the anticipated need for large funding of investment opportunities which cannot be met exclusively through domestic savings. It will also help ease the pressure on interest rates in the country.

However, the primary criticism of the budget is its continuing piece-meal nature. It is amply clear that the government, by itself, has and will continue to fail in the effective provision of services such as education and health insurance. An increase in the number of children covered under the Sarva Siksha Abhiyan is no measure of success without attention to the quality of the education. There is no explicit attempt at promoting or encouraging alternative models of education. Failure on this front would undermine any potential positive and long-term effect of other policies such as access to more credit at lower rates. Greater access to credit at lower rates by themselves can only go that far.

Similarly, a lower excise tax on certain lamps as a means for encouraging energy efficiency seems too little too late, particularly with little else in the Budget offering incentives for more efficient energy usage. Can floor lamps really be the answer to our energy problem? The Budget, unfortunately, largely remains an exercise in ad hoc intervention. While reducing custom duties on a variety of (random) goods, it offers to protect the domestic vanaspati industry!! How infant is this industry? And is it at all likely, given our past experience that it will ever grow up?

Too many people continue to spend too much time on the Budget. Too many players are forced to postpone critical economic decisions due to excessive uncertainty about the Budget. Should I wait to buy a small car or should I not? Should I increase investment in the production of small cars or is the offered incentive only for a short-term? In such an environment, can we indeed achieve the growth India is capable of?