“You can fool some of the people all the time, and all of the people some of the time, but you cannot fool all of the people all the time.” Our political leaders, who always think of the people who elected them as ‘donkeys’, should at least have a look at this famous quote of Abraham Lincoln, the 16th president of America. In fact, people in this country are really donkeys, otherwise these ‘Masters’ would no longer ride on them showing carrot and stick. I am talking about the third budget of the Narendra Modi-led BJP government at the Centre, presented by the Finance Minister, Arun Jaitley recently.
The poor in the country badly needed a good budget this year, but they did not get. Like last year the budget came with all new and big promises, but draws more brickbats than bouquets. It is worthwhile to quote Krushchev, the former Prime Minister of Russia here, “When you are skinning your customers, you should leave some skin on to grow so that you can skin them again”. With no increase in the basic income tax exemption slab and making the cars costlier, the budget promised nothing for the common man. It does talk of some sops for the first time home buyers, but again it comes with a rider of minimum alternate tax. The deduction from Rs 24,000 to Rs 60,000 under section 88G could be termed as a relief to the working class living in rented houses. Permission to open shopping malls seven days of the week will help the working class enjoy some time-out with family. No matter if they may have to shell out few more bucks for availing this facility.
On the contrary, the budget has come as a Santa Clause for the corporates in more than one way. Opening the floodgate of fund flows to the otherwise bleeding corporates is just a tip of the iceberg. The Sensex, which has been moving southward for quite some time, shoots up by more than 700 points in a single day, can be a manifestation to this very point. Besides corporates, the budget has brought some cheers on the faces of aspiring industrialists and start-ups too. It has given incentives to new manufacturing companies, relatively small enterprises. Start-ups can enjoy first three years of their operation without paying any tax. But the issue is what is left for the common man. Ignoring the common man’s long-pending demand the government continued the basic income tax exemption limit at Rs 2.5 lakh.
True, the budget has big claims to make in that it has made public money reach the poor without hindrance. The aim of this new platform will be to ensure subsidies initiated by the Central and the State governments reach the poor without any hindrance from lines of bureaucracy. However, it is yet to see how far the government is able to do so. The government time and again had announced subsidies. The only thing is the subsidy becomes so small in size that it loses relevance when it finally percolates to the beneficiary in the existing system and it is the bureaucracy which is to blame.
Interestingly, the FM has passed the buck of providing succour to the common people by saying that there is room for rate-cut by RBI when it reviews its annual monetary policy within a couple of months. The logic being given for rate-cut includes staying the fiscal consolidation path and the disinflationary announcements made in the budget. The most intriguing fact is taxing the 60 per cent of PF withdrawals at the time of retirement. The government believes that its intention was to allow people to put this 60 per cent portion of their PF money in annuity schemes so as to get pension on a monthly basis and thus become a part of pensioned society. Nevertheless this aroused a heated debate in the media and finally the government was forced to say that it was considering the suggestions made by the agitating trade union leaders. Driving cars will become costlier now due to the imposition of 1 per cent infra cess on them. On the same lines, relief has been given for the first time home buyers in the form of tax break for those seeking affordable houses. However, this will be restricted to those who go for a house having assize of 60 sq metre in the non-metro cities and 30 sq metre in case of metropolitan cities. It would have been a better idea if the tax break was given sans the rider. Further to it, MAT has been introduced on such houses, which was enough to negate the benefits given to them in the form of tax rebate.
Rejuvenating Indian economy: Muralidhar Rao
With a focus mainly on two important areas – Agriculture and Rural development – the Budget 2016 has maintained the optimism and allocated money to necessary areas well managing the scarce resources. When the world economy is facing an acute crisis, none of the major economies is performing any good and Chinese economy, labelled as the lamp post of the world economy, has contracted, the Budget 2016 aims at rejuvenating the Indian economy. The Finance Minister has treaded the strict fiscal discipline path by sticking to the fiscal deficit targets of 3.9 % for FY16 and 3.5 % for the coming year. The government has decided to reorient its intervention in the farm and non-farm sectors to double the income of farmers by 2022. It has also targeted agriculture credit of Rs 9 lakh crore in 2015-16, the largest ever.
For the agriculture sector, the budget has outlined allocations to the effect of a total expenditure of Rs 35,984 in 2016-17. This includes, dedicated and long-term Rs 20,000 crore fund for setting up irrigation infrastructure under NABARD and Rs 5,500 crore for crop insurance scheme under Pradhan Mantri Fasal Bima Yojana. This is a holistic insurance scheme wherein the farmers will pay only a nominal premium. Government also targets to bring five lakh acres under organic farming over a period of three years. The government has approved creation of a buffer stock of pulses through procurement at Minimum Support Price (MSP) and at market price through Price Stabilisation Fund to deal with the problem of abrupt increase in prices of pulses. Considering the repeated drought like conditions in various parts of India and also to prepare the communities against the vagaries of nature and climate change, the budget has a special focus on creating water resources such as ponds, wells and even compost pits. In order to pool further resources, the government has decided to impose Krishi Kalyan cess on all taxable services for agricultural sector. The second key area of focus is rural development. The government has allocated Rs 19,000 crore for Pradhan Mantri Gram Sadak Yojana in 2016-17. Rs 8500 crore has been allocated to achieve the target of 100% rural electrification by 2018. A whopping Rs 87,000 crore has been allocated for rural development, the MGNREGA scheme has been allocated highest ever Rs 38,500 crore and around Rs 2.87 lakh crore has been proposed as grants for rural bodies for the financial year 2016-17.
If the focus of Budget 2016 is on agriculture sector and rural development, it does not mean that the government has neglected other sectors. Infrastructure development has got a boost with Rs 2.21 lakh crore for road and rail sector. As many as 160 non-functional airports across the country would be developed at a cost of Rs 50-100 crore each. Rs 97,000 crore has been allocated for the roads, including the outlay for Pradhan Mantri Grameen Sadak Yojna. The government has also set an ambitious target of developing 10,000 kms of national highways and upgrading of 50,000 kms of state highways in the next fiscal.
Small and medium enterprises are the backbone of the economy, contributing an estimated 8 % of the GDP, 45 % of manufacturing output and 40 % of exports. For this sector, the Finance Minister has mentioned that Rs1 lakh crore was sanctioned to 2.5 crore borrowers by February 2016 under the PM Mudra scheme and has proposed an increased allocation of Rs 1.80 lakh crore for the same. Under the ‘Stand Up India’ scheme, Rs 500 crore has been allocated for scheduled caste, scheduled tribes and women entrepreneurs as the government envisions converting SC, ST sections and women “from job seekers to job givers”. The budget is also progressive in nature, particularly by employing modern technology for various services including financial services. The Finance Minister has promised of enactment of a law to ensure that all government benefits are conferred to people who deserve it by giving a statutory backing to the Aadhar platform. He has also announced to introduce direct benefit transfer (DBT) of fertiliser subsidy to farmers on pilot basis in few districts. Overall, this budget is a common man’s budget and aimed at reviving productive sectors which will create new demands in market needed for growth.
Now, after presenting a not-so-popular budget in a non-election year, the message has gone well with the government that something is fishy about it. Therefore, it’s bid to fire-fighting. The PM has asked his cabinet colleagues to go to people to explain the good things about the budget. So, the ministers are on the job of holding series of press conferences.Again there is a section of ministers who find it difficult to join the bandwagon on the plea that their ministries have witnessed budget-cuts, so in what way will they be able to paint bright picture of the budget promises. Normally the union ministers do not hold formal press conference on the budget as it is yet to be passed by Parliament. So, they have been asked to brief the media informally to paint a rosy picture of the budget. The problem is with those ministers whose ministries have suffered budget-cut, like Defence which has seen 8.7 per cent cut. The Urban development ministry had demanded Rs 10,000 crore for its ambitious smart city project, but the allocation was merely Rs 3,000 crore. So, the responsibility to beat the budget trumpet has been given to those ministers whose departments have got something, like Ravishankar Prasad, Ramvilas Paswan and Uma Bharti.
As a smart leader, the PM has adopted another technique by blaming the Opposition for its alleged involvement in customary mud-slinging, and rather he has advised the people to keep the Opposition leaders at bay and not to give a lending ear to their ‘flip-flops’. The axe has fallen on the auto industry, which is already facing recession. The auto makers were quite hopeful of making it big in case some relief was given to them in the budget. On the contrary, all their dreams of a favourable budget was smashed by the imposition of infra cess on cars. Now they find it difficult to do business as they find themselves sandwiched between the ongoing Jat agitation and then new taxes.
Defence is not a priority for Modi Govt: Congress
The Ministers and leaders of the Bharatiya Janata Party (BJP) are never shy of invoking the sacrifice of brave men and women of our Armed Forces, to make petty political points. But, when it came to the Union Budget, the Finance Minister Arun Jaitely did not even bother to make the now customary tribute to the military, nor mentioned the Defence allocation – the amount government thinks is required to defend the nation. Traditionally, the Defence Budget increases by around 15% every year. But, this year the defence allocation, Rs 2.49 lakh crore, was only marginally higher than last year’s Rs 2.46 lakh crore – growth of a mere 0.9%. The Defence Budget for this year is 1.62% of the GDP, the lowest since 1962. The all important Capital Expenditure, which shows the spending on new equipment, has been flat for the three Budgets under BJP. In 2014-15, capital spending was Rs 81,887 crore. This year, it is expected to be only marginally higher at Rs 86,340 crore. In the previous year’s budget, the Ministry surrendered Rs 13,188 crore because they couldn’t spend the funds. There is poor fiscal management by the Defence Ministry, and the Budget exposes Modi Government’s lack of urgency in equipping our brave men and women who defend the nation. The BJP is lackadaisical in equipping our brave service personnel, but jumps to make political capital out of the sacrifices of martyrs.
The government feels that it has included a good number of suggestions made by the citizens across the country in the budget so as to tell them that it’s their own budget. To enunciate it, on the advice of a Chandigarh based farmer-turned entrepreneur, the government made a Rs 900 crore price stabilization fund to ensure that the pulses’ price don’t shoot up in the year. Not to mention that pulse price measures the pulse of the commonman’s sentiment and it was this issue which was responsible for the toppling of the BJP in the Bihar Assembly polls recently. Now, the Congress vice president and bête-noire of Modi, Rahul Gandhi has launched a smearing campaign against the Centre by alleging that it’s a Fair & Lovely scheme by the government in this year’s budget which allows the holders of black money to convert their illegally collected money from black to white. He has also blamed that despite the big promises made by the Modi government, black money was yet to be brought back to the country at the required level.
In fact, the PM has also promised bureaucrats to award them suitably for the successful implementation of the flagship and such other schemes and also for spreading positive messages about the budget. The Babus are well aware of the Modi Ji’s kind gesture towards loyal officials. For example, the DIPP secretary Amitabh Kant, who was the brain behind the Make in India event, was made the CEO of Niti Aayog after his retirement. Former CAG, Vinod Rai whose report on allocation of coal blocks by the earlier UPA government at the Centre had spewed venom against the then ruling party, was awarded with the coveted post of chairman of Bank Board Bureau.
A wasted opportunity: P Chidambaram
After listening to the budget speech or after reading the text, what is the one big takeaway for the average citizen, asks former finance minister P Chidam-baram. The Prime Minister had promised that he would “reform to transform”. The word ‘reform’ is a little under-stood but much used word. Reform means reform of factor markets or product markets. There is little evidence of such reform in the budget. So, the NDA has followed its own brand of budget making, which is just housekeeping and accounting. Thanks to the crash in oil prices, that required hardly any effort. The government boasts that it earned more tax revenues than it had budgeted at the beginning of the year. Did they collect more corporation tax? No. Did they collect more income tax? No. What they collected more was excise duties. It is a whopping increase of Rs 54,334 crore! That amount was due to the numerous times the government increased excise duties on petrol and diesel after the budget was presented last year.
I had predicted that the government will comfortably achieve the target of fiscal deficit in the current year. It has, and I am happy. I am also happy that the government has spurned the advice of the Chief Economic Adviser and stuck to its own fiscal consolidation path for 2016-17. I take it as a vindication of the UPA government’s policy declared after adopting the Vijay Kelkar committee’s report on fiscal consolidation. In the last two years, the government had turned its back on rural India, the agriculture sector, and the social sector programmes. I would like to test commitment of the government as they appear from the budget and revised estimates for 2015-16:
Major Head Budget Estimates Revised Estimates
General Education 19,885 18,824
Medical & Public Health 10,852 10,682
Housing 1,404 1,110
Social Security & Welfare 6,387 3,504
Major & Medium Irrigation 572 481
Minor Irrigation 306 254
I may, however, note that the expenditure budgets have been achieved or exceeded under heads such as water supply and sanitation; welfare of SC, ST, OBC and minorities (marginally); and relief on account of natural calamities. Three areas were crying for attention: the rural economy, private investments, and exports. How has the government addressed the problems in these three areas? On agriculture: I am happy that the UPA schemes are being continued, but the crucial signal us ‘Price’. The NDA government reneged on its promise to give cost plus 50%. It did worse last year by giving meagre or nil increases in MSP.
The budget speech makes no promise of a fair and remunerative MSP. Nor is there any major initiative to increase productivity in crucial crops. On private investment: This is one of the four engines of economic growth, and is sputtering for the last 18 months. While several paragraphs of the speech have been devoted to public investment, there is little to encourage or attract private investment. The government seems to be unaware of the problems of the core sectors such as power, steel, coal, mining, cement, construction, and oil and gas. In these sectors, many projects are stranded and there is little new investment. Besides, there is the problem of high interest rates. I am disappointed that these issues were not addressed.
On exports: Except for one bland sentence in paragraph 86, there is no mention of exports. I think, after 14 successive months of negative growth, government has given up on the export front. The government promised a predictable tax regime. However, Part B of the speech belies that promise. There is no major relief to the tax payer or the middle class or the small and medium businessperson.
The reduction in the corporate tax rate fora very limited class from 30% to 29% is laughable. Besides there are new ceases and surcharges. Despite having an absolute majority in the Lok Sabha, government could not summon the courage to repeal the retrospective tax on capital gains (the so-called Vodafone tax) In the financial sector, only three proposals of the FSLRC will be taken up for passing legislation. The Direct Taxes Code seems to have been buried permanently. There is only a lukewarm reference to the GST Bills, but there is no promise if accommodating the legitimate criticism of the Opposition.
Finally, the government has wisely refrained from predicting the growth rate for 2016-17. The Economic Survey was restrained in assuming a growth rate of about 7%. The budget papers have given the GDP figures for 2015-16 and 2016-17 and calculated the nominal growth at 11%. If these are the government’s numbers, I would like to ask how much will be the real GDP growth in 2016-17? We know the RBI’s target for inflation in 2015-16 – 4 to 6%. How much does that leave for growth? It would be a pity that all this elaborate exercise yields, ultimately, moderate GDP growth of about 6%. Altogether, I am afraid, the budget has been a wasted opportunity.
There is no wonder if the budget is mum on the most talked about topic, GST, which, if implemented in time, can prove to be a paradigm shift for the government. In other words, the proposed GST can become a panacea for the ruling party to win the confidence of entire industrial community in one stroke. But Modi Ji knows well that silence is the best medium of communication. Even as deep parleys are on with the Opposition, the Modi’s party is not sure of getting the support of the Congress for its cherished wish to implement the same by April this year or even a year later. What to talk of constantly reducing price of oil globally as its pass-through is not happening in a literal sense and the government is keeping a big chunk of the price margin with itself. The plea being given that the government didn’t pass on the price hike of oil few years back and allowed the domestic oil companies to bleed due to huge subsidies they were forced to give to the commonman then. This plea can’t be given at a time when inflation is quite high and the commonman is forced to live half-starved due to sky-rocketing food prices.
Budget lays stress on social welfare schemes: Raman Singh
Common people and farmers focus of historic Budget Prudent fiscal management by Prime Minister Narendra Modi Chha-ttisgarh Chief Minister Raman Singh welcomed the Union Budget by hailing it as a common man’s budget. He said all the priorities have been included to cater to the needs of the common people. It is the Budget of the farmer, poor and villagers. Singh said it is a mirror of the financial policies followed by Prime Minister Modi. It reflects a delicate balancing act of Modi. Singh said it would prove to be a historic Budget in the days to come. He congratulated Prime Minister Narendra Modi and Finance Minister Arun Jaitley for presenting a people’s Bud-get keeping in mind the welfare of the masses and said “It will give an impetus to socioeco-nomic development of the country”.
In his immediate reaction on Union Budget Raman Singh expressed his happiness and said it would benefit Chhattisgarh. He said, Arun Jaitley had laid a stress on infrastructure development apart from social sectors. Top priority was given to rural development, agriculture, school education, higher education, skills’ development and medical and health sectors. The Budget will help farmers, workers, Scheduled Castes, Scheduled Tribes, Backward Classes and minorities. Under the guidance of Prime Minister Modi the third Union Budget caters to the needs of the masses and dedicated to their welfare. It will prove to be a milestone in the history of economic development of the nation. The imprint is seen on the Budget.
The Chief Minister said that it is heartening to note that each gram panchayat will be allocated Rs 80 lakh additional funds. These funds will help in the development of basic infrastructure of the rural areas. He said that Rs 35 thousand 984 crore had been provided for agriculture welfare and Rs 20 thousand crore for various irrigation schemes of NABARD which will help farmers and poor labourers. The Budget had set a target of increasing organic farming on five lakh acre which a positive signs to come. Five lakh wells will be sunk under the MGNREGA. Electricity will be provided to 18 thousand 542 villages in the next thousand days.
Gas connections will provided in the name of women in the rural regions. Keeping in mind the farmers’ irrigation needs, Prime Minister’s Farm Irrigation Scheme had been launched. An amount of Rs 5500 crore had been allocated for the Prime Minister’s Crops’ Insurance Scheme to protect farmers against the vagaries of nature. This will benefit crores of farmers in the days to come. The target is to increase the income of farmers by double in the next five years. Deendayal Antyodaya Mission had been launched to help the farmers in drought-affected regions of the country. Five lakh canals (Talab) will be developed in the rain-fed regions.
Singh appreciated the steps taken to open three thousand medical shops under the Prime Minister Jan Aushadi Yojana and Health Insurance Scheme for all which will provide insurance cover of Rs One lakh. Dialysis centres will be opened in all the district hospitals which are a healthy move. The needs on almost all the states had been kept in focus and the Budget delivered.
Yes, rural economy has got some kind of boost this time which is a praiseworthy act as strengthened rural economy is a must to make urban economy strong. Still, the commonman continues to look hopefully at the government that it will act as Santa Clause for them and make their life more convenient one.
*Author is Editor in Chief Mitaan Express