The ‘historic budget’ or the ‘vote on account’ or the ‘account for votes’ or by whatever name you call it, this mega-multimillion-dollar show was by all means, a well-managed farewell event! Although the Constitution does not expressly bar a Government from presenting six ‘budgets’ in five years, it would be a healthy convention in the given scenario, to vote (authorise) essential receipts and expenditure for the inter-regnum of 3 months only, till a new Government (be it from the same political disposition), is in place. Presenting a document not only committing receipts and payments for the whole of next year, but also laying down a set of ten commandments for the ten years ahead till 2030, looks highly presumptuous, I think!
But I didn’t find in the bucket-list of ten points, important issues like 1) Restoring discipline in the Financial Sector; 2) Education in an AI dominated ambience, 3) Reducing inequality of income and wealth and 4) the most importantly – radical reforms of the Electoral, Administrative and Judicial systems. Let’s elaborate – say, I missed concrete plans for recoveries of Bad Loans of Rs 11 lakh crore and prevention of future delinquencies, or say, we spoke of a Rs 750 crore ‘Rashtriya Gokul Mission’ for cows, but had no time for our education policy and our IIT Bombay (first in India) ranks 162nd amongst world universities. Or say we go euphoric on our GDP numbers – forgetting that just 1% of our people hold 73% of India’s wealth! Or say a political party earns Rs 1,000 crore a year from corporate, the sources for Rs 200 crore of which are allowable incognito.
The Budget: I thought I will take a look at four major pronouncements in this budget and at some of the other fiscal proposals.
First –Social Security Measures for unorganised sector, retired workmen is more of a positive intention and less of intrinsic values –a person having contributed Rs 37,200 over 31 years, the net present value of pensions on retirement would hardly be Rs 316 a month. The other apprehension is authentic headcounts in the unorganised sector – where the government routinely fumbles on job numbers – I only hope it doesn’t turn into another high-decibel election slogan!
The improvements in the retirement benefits for employees in the organised sector are very positive steps – my only question here is, the incremental establishment expenses proposed are only 5% over revised estimates of this year which will go entirely towards inflation correction.
Second – The direct transfers of Rs 6,000 a year is perplexing. Why only land-holding farmers; Why not tenanted farmers and tillers? And if the farmer is not getting his price, like the situation now, how exactly will this meagre amount of Rs 17 a day for a family of five, help? I think – this allocation of Rs 75,000 crore was better put in the price stabilisation fund in place of the paltry Rs 2,000 crore there. A questionable slogan!
Third: The Tax proposals and the loud thumps of desks, magnanimously sounded as if the threshold for personal tax was being increased to Rs 5 lakhs. What followed in the fine print was raising the maximum rebate of Rs 2,500 for incomes under Rs 3.5 lakhs to Rs 12,500 for incomes up to Rs 5 lakhs. But it’s good, it’s 96% of personal returns! A small step in reducing inequality of incomes. But hold on – the finance bill says this takes effect from April 1, 2020! I’m sure Berty Wooster would have said of me to Jeeves (in PG Wodehouse’s “The Code of Wooster’s: Splendid, Jeeves!”) “I could see that, if not actually disgruntled, he was far from being gruntled.”
The exemption on capital gains spent on buying two flats and the notional rents’ exemption on two flats are practical and are welcome. Also the good things were 24-hour processing of returns and refunds as also anonymisation of scrutiny.
2. Fourth: the GDP growth of 7.2%, without any data on Gross Capital Formation serves hardly a purpose – a World Bank report doesn’t show an encouraging trend, Government’s FDI data also is mysteriously off-the-air from June of last year. Without investments – it’s naïve to expect quality-jobs for our youth. Couldn’t really correlate “expansion of employment opportunities” and “two crore jobs in two years”. How much is “formalisation” and how much is “expansion” – am non-plussed!
On the funding side – it’s good that overall public debts are controlled. It’s important more now, to achieve tax collection targets. Couldn’t appreciate however, the increase in costly short-term Treasury Bills and Market Loans by Rs 3.5 lakh crore (an increase of 8%). Of the Rs 3 lakh crore of Defence allocation only Rs 1 lakh crore are on Capital Account – an increase of just 10% including equipment inflation! Although the fiscal deficits are controlled at 3.3%, the States incur another 3% altogether. But more than anything else, I’m rather perturbed by the CAG’s indictment of the Union Government in borrowing heavily from off-budget channels – a decidedly unhealthy proposition which should stop forthwith.
On sector-wise economic growth, agriculture continued to be dismal with a growth of only 3.5%. Whereas Goa was a standstill on mining – India as a whole recorded a healthy 7.5% growth! A wake-up call to the powers in Goa – start auctions! It’s baffling that capital expenditure allocations on education, sports and culture are down by 20%, and revenue expenditure increases just 5%!
And in conclusion: A nice set of slogans! – which everybody seems to believe, holds till July. Ultimately, my major concern as a financier is credibility, and that comes with evidence-based policies! I think that, rather than slogans, should be the directional tilt for the years ahead!
(Binayak Datta is a Finance Professional and has been Company Director and CFO in large MNCs and Indian Corporates.)
