“I have raised the salary of civil servants by 30.39 to 42.86 percent,” boasted Adhikari at parliament where he presented the budget for discussion and endorsement.
However, as the raise comes after adjustment for the existing dearness allowance, officials said the net change in salary will remain at most at 25 percent. [break]
Peons, who are presently receiving Rs 8,200, including Rs 1,200 dearness allowance, will now get Rs 9,999 a month -- a net raise of 22 percent, he told Republica.
Likewise, second class non-gazetted officers will get 23 percent raise, while gazetted officers will enjoy 24 percent raise. The salary of the chief secretary, on the other hand, has increased by around 25 percent.
The new budget has also halved the capital gains tax (CGT) on land and housing transactions to 5 percent and lowered CGT on share trading by 5 percentage points in a bid to rebuild confidence in the gloomy stock market.
The proposed budget announced 39 percent rise in the education allocation and around 60 percent rise in energy development, apart from prioritizing health and infrastructure.
Private sector players said the budget´s vision of raising investment, which comes at a time when the economy is showing initial signs of fatigue, was plausible for it would help the slumped demand rebound.
However, it is also perceived that it will exert inflationary pressure, making life tougher for wage earners and low income groups that have braved double-digit inflation for the last two fiscal years.
Economists also noted that the high budgetary earmarks without a strong commitment to check growing corruption and leakages again raises doubts over the expected implementation of programs.
Adhikari said in 2011/12 the government will spend a total of Rs 384.90 billion -- some 14 percent higher than what it promised to spend in the running fiscal year but failed badly to do.
Unlike in the past, when the private sector used to be given due focus as the driver of the economy, the new budget projects cooperatives as the vehicle for import substitution, export promotion and generating of rural employment.
Finance Minister Adhikari also announced capital subsidy and other incentives in a big way, saying that cooperatives were the main pillar of the economy that can transform women, Dalits, Janajatis, landless peasants, poor Muslims, Madhesis and people in rural areas into a productive force. “Hence, we will expand the program of ´Cooperatives in Villages, Employment at Every Household´ as a national campaign,” he stated.
However, Adhikari´s proposal drew criticism from former finance minister Ram Sharan Mahat, who mainly raised questions over the productive use of such allocations. Besides, the capacity of cooperatives remained weak and there was no effective authority to supervise and make them accountable.
The government´s efforts to appease employees and lawmakers, who are strongly in favor of cooperatives development, have widened deficit financing by over Rs 67 billion in an economy that grew by a meager 3.50 percent.
What will further make fiscal management difficult is: unlike in the previous years, the Ministry of Finance will not be bailed out by strong growth in revenue. Adhikari himself admitted in his budget statement that revenue for this fiscal year will fall short of target by Rs 10 billion.
Officials confided that the overall revenue potential of the market has slumped, and expecting it to regain confidence instantly may be asking too much.
The government relaxed the income disclosure provision on land and housing purchases, raising the threshold to Rs 10 million. Likewise, the threshold for vehicles has been raised to Rs 5 million from Rs 3 million.
The new budget has slashed customs duty for agricultural inputs and allocated Rs 3 billion to subsidize chemical fertilizers and boost agricultural productivity. It has continued livestock loans to attain self-sufficiency in meat in three years.
Adhikari also promised the earliest enactment of the Industrial Enterprise Act in line with the Special Economic Zone Act and Investment Promotion Board Act, among other things.
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