BackFourth budget: Great expectations
Steps taken for prudent fiscal management are praiseworthy, but is the govt going to generate enough revenue in the coming fiscal to sustain budgetary provisions?
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Three big things have happened in Budget 2017-18. It was presented on 1 February, instead of the last day of February. The railway budget has been merged with it, saving time and energy. And Plan and Non-Plan provisions were merged. These are bold steps. By advancing the budget day, the government has ensured that the Finance Bill will be passed by the end of March, which means the ministries, departments and state governments will get their share well in time to implement their plans and programmes.
The finance minister referred in his speech to three major issues.
First, during last 30 months, the government has moved from a discretionary administration to a policy- and system-based administration. We are reminded of the corruption scandals that the previous government was engulfed by, because of discretionary decisions over which the Supreme Court had to intervene.
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Second, this government has moved from favouritism to transparency and has in place objectivity in decision making. This is definitely a very welcome step. To bring in transparency and objectivity in all decision making, greater care has been taken to improve the system of administration.
Third, adequate steps have been taken to target all beneficiaries and eliminate blanket entitlements. Aadhaar has become key to this endeavour. Since the inauguration of this government, there has been a persistent attempt to bring in transparency and also to weed out those undeserving people who are not entitled to get government subsidies. Some have voluntarily surrendered their quota, be it the BPL card or for cooking gas; thus these benefits could be provided to a larger weaker section of society who were actually denied those benefits because of a dearth of funds.
A major attack has been launched on black money. The first decision of this government was to constitute a Special Investigation Team (SIT) to go into the issue of black money. This formation of SIT was suggested by the Supreme Court to the previous government but it sat on it for months. The SIT has submitted a number of reports to this government. Other than legislative steps that have been taken during last two years, the demonetisation decision was a bold step that this government took last November. Though the government has been saying that in the long run, the country will benefit, yet people find it hard to believe this because the economy is not in good health.
The only consolation is that the government today has data about income which can be used for tracking unaccounted money. But the question remains, was demonetisation worth it?
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Transparency in electoral reforms has been a topic of discussion for quite some time. But in this budget a bold step has been taken to cleanse the system of political funding by lowering the cap on cash donations to only Rs2,000 for political parties. Secondly, every political party would have to file returns as per the Income Tax Act. Earlier this was being submitted before the Election Commission and was out of the purview of the Right to Information law. However, exemptions to political parties from paying income tax exist, subject to fulfilment of certain conditions.
Today, the world economy is facing considerable uncertainty—especially in the aftermath of major economic and political developments. The government has expressed its anxiety over the US Federal Reserve’s intention to increase policy rates in 2017 which may lead to lower capital inflow and higher outflows from the emerging economies. Yet, greater emphasis has been put on agriculture. Credit target for agriculture has been raised to Rs10 lakh crore. NABARD has been entrusted with operationalizing agriculture credit societies; the Fasal Bima Yojana coverage is to be increased to 40% in the ensuing financial year. Interestingly a model law on contract farming is in the offing.
Similarly, large amounts of funds are being invested in rural development and infrastructure. This investment will definitely bring in growth in our economy. But the manner in which our manufacturing sector is sliding down is a matter of concern. The only silver lining is that MSME (medium, small and micro enterprises) sector is going to draw some benefits from this budget. It has suffered a loss for quite some time and it is heartening to note that the government has come to the rescue now. Total allocation for rural, agriculture and allied section is Rs1,87,223 crore. This is praiseworthy.
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For the transportation sector as a whole, including rail, roads, shipping, Rs2,41,387 crore has been provided. The total capital and development expenditure of the Railway is pegged at Rs1,31,000 crore, including a government provision of Rs55,000 crore.
After the 7th Pay Commission recommendation was accepted by the government, it was expected that the personal tax slab would get further enhanced. However, this slab from Rs2.5 lakh to Rs5 lakh will be charged at 5% instead of 10%. It’s a relief no doubt, but the next slabs up to Rs20 lakh should have been given some concession. As the Goods and Services Tax (GST) is going to be implemented, hopefully from 1 July, the impression was that adequate steps would be taken in this budget for the new taxation system. However, there is still scope to deal with that matter.
The steps that have been taken for prudent fiscal management are worthy of praise no doubt, but is the government going to generate that much revenue in the coming fiscal to sustain budgetary provisions? That is the million-dollar question.
The problems are many and it is difficult to find solutions. If reducing cash after demonetisation has had little impact how will provisioning of liberal credit help? However, the finance minister has done the best that can be done. Today India deserves swifter movement on the economic front. The finance minister has chosen to tackle the parallel economy first.
Mahtab is a member of Parliament and leader of Biju Janata Dal (BJD) Parliamentary Party in Lok Sabha.
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