JOIN USEconomy in pain, FM retired hurt
In the age of T20 cricket, Finance Minister Nirmala Sitharaman’s two-hour-forty-minute-long 2020 Union Budget speech, handily beating her own last year’s record by 23 minutes, was an attempt at a timeless Test. Last played in 1939 between England and South Africa in Durban (the timeless Tests went on till the result was achieved), the match had to be abandoned on the 12th day to enable the England team to catch the ship sailing back home. There’s a good chance we might still be hearing Sitharaman’s speech had fatigue and breathlessness not forced her to retire hurt. Damn the lack of brevity, but it’s the absence of policy coherence and vision in the face of an economic crisis that is breathtaking.
For a Budget that was expected to reawaken entrepreneurial animal spirits, resurrect sagging consumer sentiment and spur growth, it delivered a wet blanket for the markets with the Sensex closing at nearly a 1000 points down, taxation hair-tear for the salaried, yet more lip service for farmers, and multiple mentions of the Sindhu-Saraswati civilisation as treacle (sorry, make it panchamritam) to cheer the “Indic” culture warriors of the Bharatiya Janata Party (BJP). Some of these warriors, with history books to their credit, who happen to be senior technocrats hired to offer the FM counsel on matters economic, were perhaps so happy with civilisational brownie points in the Budget speech that they couldn’t offer her even editing support, forget policy inputs. Postings at the newly proposed Indian Institute of Heritage and Conservation or the museums at Sindhu-Saraswati archaeological sites in Rakhigarhi or Hastinapur might be more attractive.
There are many targets, not just fiscal deficit, that the Budget indicates would be missed by a long margin. Not even creative accounting can help much. The government has set a divestment target of Rs 2.1 lakh crore. Of the Rs 1.05 lakh crore target set last year, it has so far managed less than Rs 20,000 crore. It hopes that listing state-run insurance behemoth LIC on stock exchanges would bring a windfall. Ironically, the government has time and again used LIC’s cash to buy up dud PSU stocks when their listing flopped. What if LIC’s initial public offering too tanks? This could turn out to be the most expensive horror movie made in India.
Let’s take the farm sector. Fulfilling the government’s promise of doubling farmers’ income by 2022 is for all purposes a pipedream. As a result, farm allocation remains stagnant at Rs 2.83 lakh crore compared to the Budget Estimate of Rs 2.79 lakh crore in FY 2019-20. Considering that agriculture is a state subject, it is now left with the option of encouraging them to implement the “model” acts passed in the Lok Sabha. Given the BJP’s recent loss of power in major states, its unlikely state governments would respond to the Centre’s nudge. Perhaps the idea is to nudge Indian farmers too to set up solar farms instead of food crops and earn a living by supplying electricity to the national grid.
While India’s farmers are by now used to status quo, the gullible middle class was pinning hopes on the government’s stated desire to increase consumption and consumer demand. After this Budget the salaried class too would have learnt the lessons. In a truly bizarre move, the Budget has created two income tax regimes salaried taxpayers could opt for. The income tax rate for those earning between Rs 5 lakh to Rs 7.5 lakh has been cut to 10 per cent; 15 per cent for those earning Rs 7.5 lakh to Rs 10 lakh; 20 per cent in the Rs 10 lakh to Rs 12.5 lakh bracket; and 25 per cent for those earning between Rs 12.5 lakh to Rs 15 lakh provided they don’t claim any exemptions against insurance premium payments, investments in equity linked saving schemes or housing rent allowance. However, those who choose to make such investments can claim exemptions under the old income tax rates. The FM claimed that this would make tax compliance easy for the salaried without help from accountants and tax planners. If anything, it increases the reliance on them and in one stroke deals a killer blow to insurance and mutual fund companies in a country that is severely under insured and has low levels of retail investor participation in financial markets.
Even the pro-BJP economic analysts, usually world champions at spotting a silver lining in the darkest of skies were at a loss to find one today. But this writer detected two. One, as was the case with corporate tax cuts, the government can change policy for the better even outside of the Budget if it so intends. Two, this Budget is so listless that even the Left parties will find it hard to demand any rollbacks.
Test match won, right?
(T R Vivek is a Bengaluru-based journalist)
Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.