Exclusive Column: Thinking Beyond
We have all missed the wood for the trees once again. Post-independence successive governments have never ever seriously attempted or even thought of a surgical strike at the very ‘root and cause of the rot’ by striving for an educated, healthy and merit based classless society. Unfortunately, the stark truth has always been lost sight of, that for better citizenry and better deliverance of the much-touted schemes and plans, every budget has to, first and foremost focus on quality primary education, nourishment and health through good schools and hospitals to foster better ethics, morals and values in the society for innovation, competition and excellence. This calls for urgent and rapid transformative steps, as with most progressive countries, including China, that lost no time, more than a decade ago, in remodelling and hiking expenditure on both primary and higher education to be at least 6 % percent of their GDP. Indeed, it is the ‘have nots’ alone, our children particularly the girl child, who remain our future and will be our destiny as the youngest country in a difficult and disruptive world of tomorrow.
The headlines on various TV channels in their mad rush for TRP ratings roar loud and clear, ranging from ‘To the Point’, ‘Blockbuster Takeaways’ of Modinomics’, ‘Modi bets big on small’ and ‘Tax sops’ on ‘India Today’. On a similar note ‘Times Now’ headlines scream ‘Where are the jobs? ‘Kaabil Jaitley Raes Aaam Admmit!’ Other channels hail the budget for the “Stress on MSMEs’, ‘agro processing’, ‘rural credit’, ‘king size breaks for mid-size companies’, ‘Can the budget help BJP in polls?’. ‘ ET Now’ proclaimed it was a ‘Thumbs Up from D-Street’. CNBC and NDTV Profit on behalf of India incorporated did rate the budget positively as ‘A Pro-Growth Budget’.
Does the country have a reason to smile, yes the Minister of State Jayant Sinha is emphatic as he believes so. Ravi Shankar Prasad hails his government as ‘soojh bhooj ki sarkar and not suit boot ki Sarkar’, In contrast the opposition had a contrarian narrative and as expected Rahul Gandhi called it a ‘damp squib” whereas others complained that it lacks imagination and the big idea was missing.
Well when we look at the overall narrative, let us get away from the politics of the budget and get into the realm of realism.
The macroeconomics first! Let us consider Standard & Poor or Moody’s when they rate India for attracting foreign investments. Of course, fiscal deficit does play a key role, therefore to my mind sticking to 3% instead of the stated 3.2% could have been a wiser move to rein in fiscal discipline and show a resolve in times of global disruption.
The Wall Street Journal was very charitable commenting that ‘India’s Finance Minister Arun Jaitley managed a fine balancing act in his budget, increasing spending to stimulate growth while at the same time ensuring the government’s financial health isn’t weakened. Investors reacted positively to his announcements, as the benchmark stock index climbed as much as 1.8% after he presented the budget to Parliament. Also measures to boost a variety of sectors and strengthen the government’s efforts to fight corruption were unveiled. The focus, however, was on the country’s villages and small towns where job losses and hardships due to a cash shortage caused by the sudden withdrawal of 86% of currency have been felt the most. Let us take a look at five big measures that were part of the budget:
In a major relief for farmers and a relief to people in India’s vast countryside, where farmers and contract workers employed on small wages had faced the brunt of a cash shortage caused by the currency withdrawal. The money that the government plans to spend on rural development next year has been increased by almost a quarter to 1.87 trillion rupees. The target of loans that banks are mandated to give to farmers has also been raised to a record 10 trillion rupees next year from 9 trillion rupees that was budgeted for the current year. A welcome move is the thrust on agriculture and the farm sector that is expected to grow by 4.1% in the next fiscal year, the takeaways are: farm credit target fixed at Rs 10 lakh crore, crop Insurance to spread over 40% area cropped, dairy processing infrastructure fund to be set up under Nabard, with fund of 8,000 crore, a model law on contract farming will be circulated among states for consultation, assistance of up to Rs 75 lakh for cleaning and packaging of farmer produce, NABARD to be supported to create 63,000 functional primary agricultural credit societies at an estimated cost of Rs 1,900 crore, areas under summer and winter crops to grow, issuance of soil health cards have gathered momentum, will setup a mini lab in krishi vigyan kendras, computerisation of NABARD to help small, marginal farmers to ensure seamless flow of credit, focus on small and marginal farmers, especially in underserved areas such as the Northeast and Kashmir.
More spending on Infrastructure considering India’s crumbling infrastructure often cited as one of the biggest hurdles in the way of higher growth rates. According to government estimates, as much as $1 trillion is needed over the next few years to overhaul existing facilities and add new ports, roads and airports. The budget earmarks about 4 trillion rupees to be spent on infrastructure, 10% higher than the 3.58 trillion rupees spent this year.
Tax cuts to taxpayers in India, including companies, got some relief. In a populist gesture the government halved the tax rate on incomes between 250,000 rupees and 500,000 rupees to 5%. Although the move is expected to cost the exchequer 155 billion rupees, it was welcome news to taxpayers who have been seeing their purchasing power erode due to high inflation. Companies with turnover of up to 500 million rupees also saw their tax reduced to 25% from 30%. The government said such companies form 96% of the ones filing returns. Another welcome step was the announcement of the fight against corruption to political parties, which are infamous for a lack of transparency in their sources of funding. A cap of 2,000 rupees has been placed on cash donations, which are often used by donors to hide their identity. The government also proposed changes to regulations aimed at enabling the issue of so-called electoral bonds for receiving donations. In a major sop to Foreign Investors the government has decided to disband a body that examined large foreign-investment proposals, to make it easier for overseas investors who want to spend money into India. Most such investors now won’t have to face the country’s bureaucratic red tape that led to delays. Those wanting to invest in India will now be permitted to do so unhindered, provided they inform the central bank.
Most industry mandarins, as is usual in India, hailed the budget as ‘feel good’ for its ‘Digital Push’, ‘Affordable Housing’ and of course Policy Makers and the Niti Aayog advisors did rejoice the ‘right path’ and hailed the ‘Poll funding reforms as historic’. But there were others questioning the same, muted though, “Will the sops and incentives help?’. ‘What about the tax evaders and the widening of tax net where in a country like ours, only the service class pays tax, it is a shame that though over 2 crore do fly abroad annually, it is barely 24 lakh who declared income above 10 lakhs’. Some lamented that though ’62% of the GDP is contributed by the Service Sector, there appeared no reforms on the indirect taxes front notwithstanding the GST reforms now slated for a July 2017 launch. Well was a disruptive budget warranted in a one trillion dollar to be economy? Perhaps yes! Will the proposed budget spur demand considering the huge investment in the farm sector ? The unfortunate truth remains that we the people in India do not consider tax evasion as a moral hazard. Have we failed in taming the tax evaders, looming shadow of black money and the parallel economy?
The fact remains that the rate of growth post monetisation has been almost zero and therefore more should have been done on investments to catalyse growth. The question is, will the banks lend to credit demand considering that the risk-taking appetite of banks is very low. What about the promise of employment generation considering the much touted skill India, make in India, stand up India, smart cities, digital India campaigns?
To my mind, we have all missed the wood for the trees once again. Post-independence successive governments have never ever seriously attempted or even thought of a surgical strike at the very ‘root and cause of the rot’ by striving for an educated, healthy and merit based classless society. Unfortunately, he stark truth has always been lost sight of, that for better citizenry and better deliverance of the much-touted schemes and plans, every budget has to, first and foremost focus on quality primary education, nourishment and health through good schools and hospitals to foster better ethics, morals and values in the society for innovation, competition and excellence. This calls for urgent and rapid transformative steps, as with most progressive countries including China which lost no time, more than a decade ago in remodelling and hiking expenditure on both primary and higher education to be at least 6 % percent of their GDP. Indeed, it is the ‘have nots’ alone, our children particularly the girl child, who remain our future and will be our destiny as the youngest country in a difficult and disruptive world of tomorrow. This has been my take and also a fervent appeal this budget, during a live discussion to the anchor of a Television Channel today.
Well the jury is still out, but to me, this budget was an opportunity once again lost!