A budget that collapsed under weight of long speech

Riddled with rhetoric and contradictions, the budget structure erected by Sitharaman crumbled under its own weight

In her second Budget, Finance Minister Nirmala Sitharaman sought to find a balance between fears, and negative sentiments on one side, and harsh realities on the other. Her endeavour was to pursue short-term measures and marry them with the long-term ones. She ended up with rhetoric, contradictions, overconfidence and over-optimism, wishful thinking, and sprinklings of protectionism. As she placed one policy card over the other during a long, almost-three-hour-Budget speech, the structure crumbled under its own weight.

To allay fears and criticism of tax terrorism, she claimed that she would put a taxpayers’ charter on the country’s statutes. But she failed to give details, which hinted that it was a last-minute inclusion. Sitharaman talked about a ‘Vivaad se Vishwas’ plan to deal with tax litigations, where one had to pay the tax dues minus interest and penalties. However, she failed to understand the psyche of tax litigants – they feel they are correct and the tax authorities are wrong.

As the middle class debated the failures of banks, amid scare of a run on them, the finance minister said that the depositors' insurance would be hiked five times to Rs 5 lakh. In essence, this amount would be protected for each depositor. But she couldn’t envisage that the amount was still too low. More importantly, other measures hurt the interests of the banks and insurance companies. Banking stocks took a huge beating, even as BSE Sensex tanked by nearly 1,000 points.

For almost two years, experts maintained that India’s official statistics had lost credibility. So, the finance minister said that there would be a national policy on it, even though the statistics were among the best in the world. And then she went on to contend that the nominal GDP growth would be 10 per cent in 2020-21, even as the Economic Survey released earlier pegged it at 6 to 6.5 per cent. Not to forget that the Reserve Bank of India and Central Statistics Office pared down the growth in 2019-2020 to 5 per cent.

Such contradictions were also visible in the tax changes. For individuals, the finance minister reduced the tax rates, and increased the slabs. However, these were applicable only if taxpayers opted out of the various exemptions, which were reduced from 100 to 30. Hence, the benefits would be minimal, and not as large as they seemed. The finance minister hiked the number of exemptions for companies through a slew of measures. The tax on dividends was merely shifted from the hands of the companies to individuals, who might have to pay higher taxes on them.

The finance minister resorted to slogans. Kisan Rail and Kisan Udaan were mentioned to allow farmers to distribute their produce through trains and flights. Sadly, in the past year or so, farmers across the country have suffered from gluts and shortages. The former has meant that croppers sometimes sold at losses, and the latter implied that middlemen with adequate storage, not the producers, made a killing. The job to create warehouses, over the next few years, was given to two of the most corrupt and inefficient government agencies, Food Corporation of India and Central Warehousing Corporation.

When it came to a long-term vision, wishful thinking was evident on issues related to jobs, manufacturing and agriculture. The task to finance infra projects of Rs 103 lakh crore over five years was left to government agencies, who would get Rs 22,000 crore from the government. Sitharaman started with the idea of an electronics global hub, which will take time, and ended with protectionism to the domestic makers of medical devices, which might hike prices.

Still, there were some legitimate and interesting policies related to start-ups, small and medium firms, and small traders and shopkeepers. But they came with riders. And these are what the country doesn’t need.

(Alam Srinivas is an independent investigative journalist and author of several books)

Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.