Thinking Beyond: Our World Our Times
Post budget customary jokes apart, the dismay of the argumentative Indian who form the bulk of the middle class was apparent on whatsapp and the digital media, one such jibe taking rounds is, “Budget summary in 3 lines: lower class gets subsidy, upper class gets rebates and the middle class get debates!“. Apparently, this was in light humour, nonetheless, I would delve briefly into some of the pronouncements having my faith intact in the offerings. Indeed, yes it was Jai Kisan, Jai Swasthya, and Jai Bharat and so on, in the 2018 Namonamo penultimate budget. The last one for a full year before the May 2019 general elections has indeed been from a middle class perspective, a damp squib for most, though I do not intend to read in between the lines on either Part A or part B of the Union Budget. However, to have a better perspective let us look at the India GDP growth trajectory that has ranged from 7.9% in 2015 to 6.1% in 2016 and is projected to be 7.5% in 2019 by Finance Minister Arun Jaitley. Taking into account the realpolitik on the ground, the efforts of the government to maintain a tight fiscal consolidation of 3.3% by next year and a statutory compulsion of a moderate rate of inflation in next few years we do have a rationale and a backdrop to budget 2018: the good, bad and ugly.
The mood of the nation is evident from the headlines that roar loud and clear on both the audio visual and the print media: Budget natyam a poll dance in nine rasas, FM leaves rich poorer and the poor poorer, FM’s popular not populist tune, Short term jitters over long term tax, Aches to ache happy returns to senior citizens, GST leaves INR 50,000 crore hole in centre’s pocket, consumers left at mercy of global oil markets, FM Defends LTCG Tax, Modicare a Challenge, MSP Hike not easy, Divestment FM upbeat, Dalal Street : Sea of Red, Worst Fall since DeMo, Investors run for cover, Where are the markets headed, 5 Lakh crores market cap wiped out, Healthcare move is once in a generation kind of reform, Customs duty blow to bald and beautiful and the list goes on and on!
But before we delve more into the symptomatic and systemic factors that really define our approach to change for a transformational new India i.e. Bharat a few quick comments on the budget as such. On the positives the Namo care or Modicare, perhaps the world’s largest welfare push of its kind of INR 5 lakh rupees per year to cover 50 crore individuals is a brilliant move to initiate a medical safety net for the poorest of the poor for a life of dignity irrespective of caste and creed. I guess the amount of 6 Lakh crores for infrastructure in this budget may help in stimulating growth. The optimism and the promise to double Farmers’ Income by 2020 is a laudable announcement! But this entails an investment of almost 6 and half Lakh crores. Do we have the resources and the mechanism in place? The Finance Minister obviously has, perhaps the existing oil bonanza and the divestments! I did expect a statement of purpose on the biggest reform ever, the GST for one market, one tax and one nation from the Finance Minister. Though we do have the GST Council, the proposed GST legislation and also that the process is very different now than the one originally introduced, the Finance Minister could have done well to have included the future possible.
I have always wondered as to why the great Indian middle class keeps moving perennially despite being the horse that is flogged year after year by respective governments to bear the tax burden, both direct and indirect. A bitter sweet offer though of standard deduction of 40 per cent that does translate into a lollipop after discounting the slapping of additional one per cent cess for health and education. Though there is some cheer for the senior citizens, I have never understood as to why the service class who form the actual spine of the great Indian middle class are taken for granted, when they are perhaps the real consumers who stimulate and generate demand for goods and services in consumption and demand centric economy of our country. Yes on the rationality of the move, I do fail to understand as to how the direct tax base will ever be made broader as touted by Arun Jaitley since tax evasion remains rampant, the corporate tax rate of 25% on SMEs below 250 crores. Indeed the majority of our professional and business class remain outside the tax net contributing only lower numbers of assesses contributing an average tax of INR 25000/- versus an average INR 77000/- by the service class, perhaps they have no other go. Yes I expected the FM to have discovered more innovative approaches to rope in the elusive missing class in our tax base to be participating in the national development agenda.
On the flip side the automatic salary revision every 5 years and linking it to inflation for the MPs does imply rewarding them even for non-performance without any debate whatsoever in the years to come. An avoidable exercise in a country where largesse and handouts have become the order of the day be it for the political class or for their own political ends that the Finance Minister could have avoided.
Hold your Elephant‘s, let me now focus on the mirage that is the great Indian middle class! In a recent issue, the Economist raises the question, after China where next? And it goes on to further proclaim that the so called horde of 300-400 million middle class Indians conjured up by marketers scarcely exists. Researchers and Economists do concur, lead by Thomas Piketty, who in a recent research paper co-authored with Lucas Chancel of the Paris School of Economics, estimate that the share of the top 1% in India’s income pie is higher than ever before at 22% compared to the bottom half of India’s population, they argue. Credit Suisse in a similar study suggests that the top 1% account for more than half of the country’s wealth. A more reliable study by Ishan Anand and Anjana Thampi reveals that the top 1% in India accounted for nearly 28% of the country’s wealth in 2012, an increase of 11 percentage points since 1991 whereas the share of the bottom 40% in the country’s wealth declined from 5 % to less than 4%. Thus we may surmise that the wealth gap in the country appears to be real, and has been increasing and to speak of the great Indian middle class , the benefits of economic liberalisation and prosperity is never shared with them by statist government interventions successively. Reasons cited are not at all mysterious, and as pointed out, it is the inequality and corruption variables that lead the policy thinking even if the intentions are forthright and true to Modi Mantra of Sabka Sath Sabka Vikas.
‘Maximum governance and minimum government’, was one of the opening remarks made by the Finance Minister Arun Jaitley in his budget speech but the jumla remains elusive despite Prime Minister Narendra Modi’s sincerity in pursuing his electoral promise of ‘Acche Din’. Yes, Bharat versus India, the debate still rages even after 70 years of Independence and I am yet to figure out why successive governments in our country even with the best of brains and efforts year after year still grapple with the same key issues. The abysmal performance of the delivery mechanism and above all the myopic implementation of various schemes, the bottlenecks and potholes to the highway that will lead India to a developed nation status do not even consider primary health and school education as important enough. I dare not speak of the hazards of a lethargic bureaucracy inherited from the British Raj and the bureaucrat politician nexus that is still driven by a socialist mindset, which has after all these years become unresponsive to the call of the times, irrespective of the party it represents.
Salient Features of Finance Bill, 2018
~ No change in Tax Rate. All persons including individuals, HUF, Firms and Companies to pay same tax .However Education cess is being increased from 3 to 4 % to be known as Education and Health cess.
~However for Domestic Companies having total turnover or gross receipts not exceeding Rs 250 crores in Financial year 2016-17 shall be liable to pay tax at 25% as against present ceiling of Rs 50 crore in Financial year 2015-16.
~Long term Capital gain exemption under section 10(38) in respect of listed STT paid shares being withdrawn.
~However capital gain up to 31.1.2018 shall not be taxed as cost of acquisition will be taken as Fair Market Value as on 31.1.2018.
~Tax on STT paid long term capital Gain will be 10% under Section 112A. Further such tax will 5 be liable for TDS.
~Standard Deduction of Rs 40,000 for salaried employees. However benefit of transport allowance of Rs 19,200 and Medical Reimbursement ofRs 15,000 under Section 17(2) are being withdrawn. Thus net benefit to salaries class only Rs 5,800
~Provision of Section 43CA, 50C and 56(2)(x) being amended to allow 5% of sale consideration in variation vis a vis stamp duty value. On account of location, disadvantage etc.
~Provision of section 40(ia) and 40A(3) and 40A(3A)are being made applicable to Charitable Trust. Hence expenditure incurred without deduction of tax and in cash will not be eligible as application of income under section 10(23C) and section 11(1)(a).
~Agriculture Commodity Derivates income /loss also not to be considered as speculative under section 43(5).
~Income Computation and Disclosure Standards (ICDS) being given statutory backing in view of decision of Delhi High Court decision.
~Marked to market loss computed as per ICDS to be allowed under section 36.
~Gain or loss in Foreign Exchange as per ICDS to be allowed under new section 43AA.
~Construction Contract income to be computed on percentage completion method as per ICDS.
~Valuation of Inventory including Securities to be as per ICDS.
~Interest on compensation, enhanced compensation. Claim or enhancement claim and subsidy, incentives to be taxed in the year of receipt only as per new Section 145B.
~Conversion of stock in trade to capital asset to be charged as business income in the year of conversion on Fair Market value on the date of conversion.
~54EC benefit of investment in Bonds to be restricted to Capital gain on land and building only. Further period of holding being increased from 3 years to 5 years.
~PAN to be obtained by all entities including HUF other than individuals in case aggregate of financial transaction in a year is Rs 2,50,000 or more. All directors, partners, members of such entities also to obtain PAN.
~All companies irrespective of income to file return and in case it is not filed, such companies will be liable for prosecution irrespective of the fact weather it has tax liability of Rs 3,000 or not.
~Assessments to be E assessment under new section 143(3A)
~Govt will give free gas connections to 8 Cr women. Ujjwala scheme to give free gas connections extended to 8 cr women from 5 cr earlier
~6 crore toilets have been built under swachbharat, Plan to build 2 crore toilets in the next fiscal
~Govt aim is to provide shelter for every poor in the country by 2022. Govt will focus on Dedicated housing system
~The scope of long-term irrigation fund to be expanded – Govt’s focus is on maximum livelihood of agriculture and allied activities and construction of rural infra and new household electricity connections:
~Saubhagya Yojana: 4 crore poor will get power connection. The govt will spend
Rs 16,000 crore on this scheme. Rs 16,000 Cr Allocation For Electricity Connection to Poor Families
~By 2022, every block with more than 50% ST population will have an Eklavya Model Residential School: Move from black board to digital board gradually
~Allocate Rs 2,600 underground water irrigation plan in 96 districts
~Govt to increase digital intensity in education. Technology to be the biggest Driver in improving quality of education
~Govt to launch ‘Revitalising Infrastructure and Systems in Education by 2022
RISE – Revitalising Infra and Systems in Education by 2022 – 1,00,000 Crores
~Prime Minister Research Fellows scheme will be introduced for BTech
students, hey will do PhDs in IITs and IISc. They will voluntarily teach in Higher
Education institutions few hours every week
~Announces two major schemes for health, one being health and wellness
centres. comprehensive healthcare scheme with maternal and child services,
free essential drugs and diagnostics, allocates Rs,12 crore for this flagship programme, invites pvt sector and CSR to support this initiative
~Have decided to take healthcare protection to a new aspirational level.
Launching a flagship National Health Protection Scheme to cover 10 crore poor
and vulnerable families, benefiting approx. 50 crore: Rs. 5 lakh per family for secondary and tertiary care hospitalization WORLDS LARGEST SUCH PROGRAM
~TB – allocate Rs. 600 crore to provide nutritional support to TB patients, Rs. 500 per month to the patients
~ 1.5 Lakh Health Centres across India will provide Maternal and Child Care
Services. Rs. 1500 Crore in FY 2018-19. Call for CSR adoption also of these
centres. The Government is slowly but steadily progressing towards universal health coverage:
~24 new govt medical colleges and hospitals by upgrading existing district
medical colleges and hospital. Ensures 1 medical college for every 3 parliamentary constituencies:
~Rs 16,000 crore will be spent on providing electricity connection to nearly four crore poor households
~Govt will expand PM Jan Dhan Yojana: All 16 crore accounts will be included
under micro-insurance and pension schemes
[3:16 PM, 2/1/2018] +91 98916 78009: 61. Pradhan Mantri Jeevan Jyoti Bima Yojana has benefited 5.22 crore families
~Rs 3794 cr allocated for MSME sector
~Target of 3 lakh crore for lending under PM MUDRA Yojana
~Govt. to contribute 12% of EPF contribution for new employees in all sectors.
~Women’s EPF contribution reduced to 8% for first 3 years of employment. No changes in employer contribution
~ PM Research Fellow Scheme; 1000 B-Tech students to be selected
~ 99 cities selected under smart city mission, to be allocated 2.04 lakh crore
~Outlay of Rs 7148 cr for textile sector in FY19
~Confident to complete national highways exceeding 9,000km in 2018-19 :
~propose to transform 10 tourist sites as “iconic”; 9000 km National highways
to be completed in FY18
[3:16 PM, 2/1/2018] +91 98916 78009: 71. MSMEs are a major engine of growth and employment. Mass formalisation of
business of MSMEs is taking place in the country after demonetisation and
introduction of GST. This is generating an enormous database of information:
~4000 km of rail tracks to be electrified
~Govt will soon announce measures to effectively address NPAs and stressed
accounts of MSMEs. This will enable a larger financing of MSMEs:
~ Thousands of unmanned railway crossings to be done away with.
~All trains to be progressively provided with WiFI, CCTV and other state-of-the- art amenities: Railway capex for FY19 at RS 1.48 lakh crore; focus to be on electrification, safety
~12,000 wagons, 5160 coaches and 700 locomotives being procured. There is significant achievement of physical targets by Railways
~All railway stations with over 25,000 footfall will have escalators
~498 Projects worth INR 19428 Crore and 292 Sewage Projects worth INR 14294 Crore under AMRUT scheme
~600 major railway stations to be redeveloped.
~Mudra loan given to more than 10 crore people of which 7 crore are women and 5 crore from SC & OBC. ₹3 lakh crore more allocated this year.
~ Rs 17000 cr has been allotted to create and extent suburban Bangalore railway network
~ Rs. 11,000 crore for Mumbai rail infrastructure
~AMRUT program to focus on water supply to all households in 500 cities.
Water supply contracts for 494 projects worth 19,428 core awarded
~Govt plans to expand airport capacity by 5 times to 1 billion trips a year. Rs 60
crore has been allocated to kick start the initiative
~Sebi to make it possible for companies to raise 25% of financial needs via
~ Exports seen growing at 15 per cent 2017-18, says Arun Jaitley
~5 lakh wifi hotspots to provide broadband access in rural areas at a cost of Rs 10000 cr
~We now propose to treat education holistically without segmentation from
pre-Nursery to Class 12. Rs 1 Lakh crore allocated for education infrastructure.
~80,000 crore disinvestment target for 2018-19, target for 2017-18 has been exceeded and will reach 1 lakh crore rupees:
~Digital India allocation doubled. 1 lakh villages already connected, 1.5 lakh more villages to be covered under Bharatnet
~ Government insurance companies to be merged into a single entity, and subsequently listed in the stock exchange, as part of the disinvestment programme: 3 state-run insurance companies to be merged and listed
~PSU bank recap will allow banks to give additional lending of Rs 5 lakh crore
~National gold policy to be announced, #gold monetisation scheme will be revamped to make it more people-friendly
~Bid for automatic revision of salary for MPs every 5 years indexed to inflation:
~Emoluments of the President to be revised to Rs 5 lakh per month & emoluments of the Vice-president to be revised to Rs 4 lakh per month:
~ Total revised expenditures 21.5 lakh crore compared with 21.47 lakh crore estimated
~To help the cashew processing industry, I propose to reduce the customs duty from current to 2.5%
~E-assessment to be rolled out across the country: a new scheme of assessment to be notified eliminating person to person contact:
~Social welfare surcharge of 10% on imported goods.
~Increase in custom duty on mobile phone from 15% to 20%