Mainstream, VOL LV No 9 New Delhi February 18, 2017
Contours of the Economy?
Tuesday 21 February 2017, by
Howsoever prudent the Budget, the fact remains that it encourages the status quo. Probably, Prime Minister Narendra Modi’s government had the UP elections in view. There is no new text proposal, nor is there any long-term plan of how to collect revenue. The dependence is on 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 employ-ment. The private sector has not expanded enough to absorb them. Agriculture is going up, as much as by 4.1 per cent. But the graduates want a white-collar job, even though the salary is low. Finance Minister Arun Jaitley admits that the Budget has not created jobs. But his defence is that if and when the economy picks up, the jobs 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 fillip to the sector. The public sector, which was supposed to touch the commanding heights, has failed to do so because it is starved of funds.
The biggest drawback is that there is no planning. When the Prime Minister, Narendra Modi, assumed the reins of government, he wound up the Udyog Bhawan. He did not believe in planning and thought it fit to spend as much money as required. There is nothing bad in such a thinking except that there is no rhythm in expenditure. The government has felt the need but has left it to the Ministry concerned to plan its own expenditure.
There is still an obsession with us that deficit financing should be curtailed. When the inflation hovers around 3.5 per cent, there is no harm in spending more. The system can take it. Only by spending more, the country can have new enterprises, private and public.
What has weighed with the Finance Minister is fiscal management, not political manoeuvring. That is the reason why the Rashtriya Swayamsewak Sangh (RSS) has criticised the Budget, arguing that expectations have not been met. Arun Jaitley was thinking of the country’s fiscal health, even at the risk of annoying those who control the Bharatiya Janata Party (BJP).
By bringing down the contributions to the political parties, from rupees twenty thousand to two thousand, 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 gains 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, nor a socialistic pattern of society, as India’s first Prime Minister Jawaharlal Nehru had envisaged. But some contours of the economy are necessary.
To the common relief of the middle class, the government has proposed to halve the income tax to five per cent for those earning between Rs 2,50,000 and Rs 5,00,000 per annum. This will increase the number of taxpayers because to hide money is also a great hazard. Many experienced it when they were exchanging the currency notes of Rs 500 and Rs 1000. 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 many, many years. 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 upto Rs 50 crores will benefit 96 per cent 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 lakhs will allow the banks to focus on value-based banking rather than purely transaction-banking.
Abolition of the 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. It is good that the builders who do not deliver the houses on time are punished through the obligation to give back a part of the money to the people who have given the advance.
Modi’s government is half-way from the general elections. It has probably some perspective in view. But it is not visible and that is going to affect adversely the outcome of the next general elections. 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 tragedy of re-electing Modi is strengthening Hindutva. Those who take orders 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.
The author is a veteran journalist renowned not only in this country but also in our neighbouring states of Pakistan and Bangladesh where his columns are widely read. His website is www.kuldipnayar.com