WEDNESDAY, APRIL 24, 2024
The five tranches of Finance Minister Nirmala Sitharaman have been finally spelled out, much to the disappointment of the salaried class, which not only pays income tax but also braves the salary cuts under the fear of job loss. With unemployment levels at a record high on the back of a sagging economy, the Narendra Modi government had to do something dramatic to lift the mood of gloom and doom especially when the entire nation is under lockdown and the salaried class in the private sector is uncertain whether their jobs will remain after the lifting of the lockdown.
Nearly all announcements made during the five consecutive days could have been easily addressed during the annual Budget, which was tabled on February 1, 2020. Majority of the announcements made, were presented by the RBI-appointed UK Sinha-led committee report which was presented to the Union government in July last year. The UK Sinha Committee was set up to look into the problems faced by the MSMEs.
According to the feelers one is getting through several “short budget” deliveries that a majority of the squint eye is opened towards the supply side while the demand side gets the step-motherly treatment. Going by the trend, for the salaried middle class, it is truly “atma nirbhar” (self reliant) with very little hope of any relief from the Union government.
In October last year to give a fillip to the sagging economy, Finance Minister Sitharaman had sharply reduced the corporate tax rate for existing companies from 30 per cent to 22 per cent if they opt not to claim any specified tax benefits and, from 25 per cent to 15 per cent for companies incorporated after October 1, 2019 provided they are into manufacturing. The end result was that the benefit could not be passed on to the end consumer.
While the private sector, which was benefitted, applauded the move initiated vide an ordinance promulgated on September 20, 2019, there was criticism too, some muted and some loud. Corporates have greater financial strength, went one argument, and ignore the weaker middle class’ concerns should have been addressed first. Another argument was it was not the tax rate as much as the non-conducive investment climate that needed to be set right. Weak demands coupled with high taxes indeed were the cause behind unsold automobiles, newly constructed houses and other goods.
On advise of the Prime Minister, the Finance Minister on May 13 started her daily press briefings on the Rs 20 lakh crore financial package announced a day earlier by the Prime Minister. It did surprise many that even after 51 days of lockdown the government did not address the cause of migrant labourers in the Finance Minister’s first briefing. However, it was taken up later after the Opposition raised the issue vociferously. Nevertheless, the message went around that the Union government had not shown the keenness to address the miseries of the migrant labourers.
Former Union Finance Minister Yashwant Sinha, in one of his columns, mentioned that the state of migrant labourers reminded him of “the most abiding image of the Vietnam War is of a little naked girl running away from the explosion behind her. But the government, specially the PM, had no word of sympathy for them, not even for the dead. Will India forget it in a hurry?”
Even though the announcement made, may augur well in future but for immediate shot in the arm of sick economy some of the elements were missing. The demand side has been completely overlooked. Rs 20 lakh crore, 10 per cent of GDP is a big number. Nearly all sections of the society have been directly addressed, except the income taxpayer salaried middle class section. This section not only pays income taxes to the government along with other taxes like GST, VAT etc but is also somewhat responsible for raising demand in the market. Irony is, if this section does not have the money to spend the simple theory of demand-supply balance will not strike and economy will remain in doldrums.
