The second budget presented by Finance Minister Arun Jaitley seems to have a sense of direction, but lacks that fire-works appeal. It has many elements which could easily be classified as building blocks. The final edifice isn’t visible, but then there are three
more Budgets to go before a general election and by then the government must have something to show or face the harsh judgement that the electorate reserves for governments that do not perform.
To start with, the government does not have much money to play with. Clearly, this government isn’t sitting on a pile of cash even though international oil prices are at a record low and the economy is supposedly growing at the rate of seven percent.
The government plans to spend Rs 19.78 lakh crore in the next year, of which only Rs 5.5 lakh crore falls under the plan head.
It is this figure that concerns us more that the non-plan expenditure
because this is the amount available to build the economy.
It’s a fairly large amount but is still roughly one-fourth of
the total budget.
The government is seeking to
build or re-build the economy on
the foundation of nine pillars of
which agriculture, rural sector and
infrastructure are the strongest. This
probably explains the total outlay of
Rs 2.31 lakh crore for infrastructure
with roads and railways getting a
huge chunk and the pledge to double
farmers income in five years. Tax
reforms, ease of doing business are
crucial to changing the business climate
in the country and are listed as two of the nine pillars, but
the road to achieving this goal is yet to be constructed. There is
no clarity here and with retrospective tax hanging like a sword
over the heads of companies, industry has little to cheer about.
As is always the case the burden for this budget is going to
be borne by industry and the well-off. The upper middle class
will have to shell out more through service tax and a one per
cent increase in tax on all luxury goods. That would include
eating out and cars over Rs 10 lakh. The middle class, which
was hoping for a revision in tax slabs was disappointed, but
this is not the first time a finance minister has let this segment
down. Nonetheless, exemptions on housing loans, purchase
of flats below Rs 50 lakh and a hike in the house rent allowance
slab should not leave it entirely disenchanted with Jaitley.
Truth is, any concessions here would deprive the government
of resources and not spur growth.
Infusion of Rs 2.87 lakh crore at the gram panchayat level
might seem like a dream, but the truth is all this money does
not flow as easily as is said. Secondly, not all of it reaches the
intended targets and leakages are aplenty. However, the biggest
problem with flow of money to the panchayats is State governments,
which are reluctant to give these grassroot level institutions
financial autonomy. The rules for implementing schemes
are burdensome and getting clearances from departments an
uphill task. More powers need to be rolled out to panchayats
under the 73rd amendment if the intention behind the large
spend is to be realized.
For Goa, the biggest gain from the budget is slashing of export
duty on iron ore from 10 per cent to zero, a long standing
demand of the industry which is finding it difficult to restart
operations in the light of low iron ore prices in the international
market. A second demand for abolishing either the district
mineral development fund or the Goa iron ore permanent fund
because it amounted to double taxation is yet to be resolved.
By and large, the Budget appears to set course for a long journey
toward realization of a dream of a strong and robust India
and has sacrificed popular measures to get there.
