A populist budget

THE fiscal budget for 2013-14 has been unveiled. It stands at a staggering Tk2.22trillion. GDP growth rate has been set an ambitious 7.2 per cent. Getting that level of growth will require a significant surge in private investments that include foreign direct investment. To what extent that will be possible in the prevailing political climate and inadequate infrastructure remains to be seen. Increased revenue from taxation is set to rely from direct and value added tax to the tune of Tk130billion and Tk95billion from the former and latter. Any failure to achieve desired target will force the government to borrow heavily from the banking sector.

It is interesting to note that inflation has been capped at 7 percent in the budget. How this will be attained has not been thoroughly spelt out, especially since point-to-point inflation in April, stood at 8.37 percent. Individual incomes are set to increase with a revised income taxation regime. Tax exempted threshold increased to Tk220,000 against Tk200,000. Investment incentives have received a boost with an increase in tax rebate for investment, etc. A major disappointment for policy watchers is the keeping of provision for legalising black money. This has been linked to the ailing real estate sector in the form of purchasing land and apartments.

Looking beyond the facts and figures presented in the budget, some questions loom large. The higher growth can only come from savings and investments. Domestic savings have dropped to 12 percent, the lowest in a decade. Private investment to GDP ratio stands at 19 percent is the lowest in 6 years. Private sector development has been hampered due to weaknesses like graft in the banking sector. The budget presented is an "electoral" budget. However, the national budget ought to reflect ground realities and not mere populism.