Encouraging the status quo

BETWEEN THE LINES

Howsoever prudent the Budget proposals are, the fact remains that it encourages status quo. Probably, Prime Minister Narender Modi’s National Democratic Alliance (NDA) government had in mind the elections to Uttar Pradesh and four other states.  There is no new tax proposal, but then is there no long-term plan how to collect revenue either.

The dependence is on the indirect taxation and the curtailment of subsidies. There is nothing wrong in resorting to such a method. But the adverse effect is obvious.

Today’s India is crying for jobs. Thousands and thousands of graduates have no employment. The private sector has not expanded enough to absorb them. Agriculture is going up, as much as 4.1%. But the graduates want a white collar job, even if the salary is low.

Finance Minister Arun Jaitley admits that the Budget has not created job. But his defence is that if and when the economy picks up, the job will come.

It is no consolation to the college quitting students that the jobs would come sooner or later. Some relief has been given to the small scale industry.

But this is not adequate for giving a fillip to the sector. The public enterprises, which were supposed to touch the commanding heights, have failed to do so because they are starved of funds.

The biggest drawback is that there is no planning. When Narendra Modi assumed the reins of government, he wound up the Planning Commission. He did not believe in planning and thought it fit to spend as much money as required. There is nothing in such thinking except that there is no rhythm in expenditure. The government has felt the need but has left to the ministry concerned to plan its own expenditure.

There is still an obsession with us that deficit financing should be curtailed. When inflation hovers around 3.5%, there is no harm in spending more. The system can take it. Only by spending more, can the country have new enterprises, private and public.

What has weighed in with the finance minister is fiscal management, not political manoeuvring. That is the reason why the Rashtriya Syamsevak Sangh (RSS) has criticised the Budget, arguing that the expectations have not been met.

Arun Jaitley was thinking of country’s fiscal health, even at the risk of annoying those who control the Bhartiya Janata Party (BJP).By bringing down the contributions to the political parties from Rs 20,000 to Rs 2,000, he has risked the annoyance of all political parties, including the Leftists.

But he had his eyes fixed on presenting a balanced picture before the country. Therefore, touching the contribution to the political parties was essential. Markets have heaved a sigh of relief with Sensex zooming by 486 points when the Budget was announced. There is, however, no long-term capital gain tax on shares trading as many feared.

Still the government should have in its mind some upper limit. It cannot be free for all. True, there is no Planning Commission now, nor a socialistic pattern of society, as India’s first prime minister Jawaharlal Nehru had envisaged. But to have some contours for the economy are necessary.

To the common relief of the middle class, the government has proposed to halve the income tax to 5% for those earning between Rs 2.5 lakh and Rs 5 lakh per annum. This will increase the number of tax payers because to hide money is also a great hazard.

Many experienced it when they were exchanging the currency notes of Rs 500 and Rs 1,000. In the black market, they were sold at half the price. The Medicare scheme is noteworthy.  

The government’s decision to have the joint budget, the general and the railways, is a departure from the practice of several decades. If I am not mistaken, this is the first time that a joint budget has been presented before parliament since independence. If nothing else, it will keep the railways out of politics.

Reducing corporate taxes for companies with an annual turnover up to Rs 50 crore will benefit 96% of companies. The idea of introducing electoral bonds is a novel one and possibly the first of its kind in the world.

This will streamline and cleanse electoral funding. Banning cash transactions over Rs 3 lakh will allow the banks to focus on value-based banking rather than purely transaction banking.

Abolition of Foreign Investment Promotion Board (FIPB) may streamline funds coming from abroad. Providing infrastructure status to affordable tenements and rationalisation of area
will make the housing sector more competitive.

Mid-term view
It is good that the builders who do not deliver the houses on time are punished through the obligation to give back part of money to the people who have given the advance.
Narendra Modi’s government is half way from the general election. It has probably some perspective in view.

However, it is not visible so far and that is going to affect adversely the outcome of the next general election. No doubt, he would like to have another term. His task has been made easy because Congress vice president Rahul Gandhi is not a formidable opponent. The party has been sinking for some time now.    

The tragedy of re-electing Narendra Modi is akin to strengthening the Hindutva forces. Those who take order from Nagpur, the headquarters of the RSS, cannot serve the country which has secularism as its ethos. The constitution which rules the country gives equal right to Hindus, Muslims, Sikhs and Christians.

The BJP cannot challenge the letter of the constitution because of the Supreme Court which recently held that religion or caste cannot be used for propaganda purpose during the elections. It is not the letter but the spirit which counts. The economy will have to change accordingly.