Economic Highlights
New
Delhi, 5 July 2014
Jaitley’s Budget
Trapeze
HOW TO MAKE
SHRESTHA BHARAT
By Shivaji
Sarkar
All are
agog over Finance Minister Arun Jaitley’s maiden Budget to be presented three
days hence 10 July. Importantly, on what innovation he formulates to fulfill
the BJP’s promise of making the country “Ek
Bharat, Shrestha Bharat” towards a new economic pedestal. How he innovates,
remains to be seen.
Notably,
beset with a difficult economy he has a lot to do. First, take steps to ensure
prices not only come down but also remain stable. Two, with a section of the
Party wanting relief in income tax, if not abolition, it would be a daunting
task for Jaitley to address this critical issue. Three, agriculture needs a new
impetus as do health care and infrastructure.
But the
new Finance Minister should not get obsessed with high speed but consolidate
the transport system. Introduce benevolent programmes for Dalits, weaker
sections and women which are part of the BJP manifesto.
Understandably,
the burgeoning deficit is his main concern. Given that no Government could
achieve its development objectives if deficit remained a concern as it has a
multiplier effect. Notwithstanding, economists of think tanks like NIPFP who
have different viewpoints. They do not consider deficit as a deterrent, instead,
a necessity for the successful implementation of welfare programmes and
development of the masses.
Wherein,
it could be utilised for investment in infrastructure and the core sector. Not
only would it generate jobs but also the benefits would percolate down and
accelerate the development process.
Undeniably,
Manmohanomics did the opposite. It led to GDP (Gross Domestic Produce) growth,
checked the deficit, but increased unemployment and resulted in higher profits for
the organised sector and large corporates but impoverished the poor and middle
class.
Indeed,
the choice for Jaitley is difficult. He has to usher in new economics ---
balance concerns of the masses, as promised in the Party manifesto and take
care of investment, which would come with growth of the corporates. Consequently,
the balancing act would not be easy.
The burgeoning
deficit has its problems too. It leads to larger borrowings. As it stands, the
UPA’s interim Budget is composed of almost 50 per cent borrowings which do not
address the concerns of the aam aadmi.
Rather, the people were the worst hit as majority of the Congress-led
Government’s programmes suffered the biggest cuts.
Importantly,
the 10-year UPA rule shows GDP growth but alongside a phenomenal rise in the
number of those unemployed. Thus, under a broader economic revival, the BJP-led
Government has to accord high priority to job creation and opportunities for
entrepreneurship.
Questionably,
should Jaitley consider the formula of two BJP leaders Subramanyam Swamy and
Nitin Gadkari for income tax abolition? It appears the Finance Minister might
not do this now though he could tweak exemptions slightly as he has to ensure
abolition should not cause any loss to the Government. Whatever is notionally
lost could be made up by reducing the size of the not-so-honest income-tax
department.
At
least, Jaitley should consider freeing bank deposits of tax deduction at source
(TDS) which has led to severe sufferings of small depositors and retired people
who are subjected to TDS on small FDs and face tremendous problem in recovering
taxes which they are not supposed to pay.
Besides,
poor women and senior citizens find it difficult to go through unnecessary
formalities of filling Form 15 and comply with other paperwork. A minor concession would help them and the
economy along-with not impacting the deficit either. Rather much of the extra
expenses people made could save them from harassment and pep up the economy.
Significantly,
agriculture is a key area for meeting Prime Minister Modi’s developmental
goals. The farmer till date has never got any subsidy as it was always pocketed
by the fertilizer and related lobbies. Time now, to reorient subsidies.
Pertinently,
focus on the farm sector would be a welcome move for more than one reason. It
would boost this segment and give a fillip to rural economy which would help
achieve the objective of development and growth. Not only would it increase
rural income but also augment the purchasing power of the downtrodden which
would result in a rebounding impact on the growth of the manufacturing and
industrial sector.
However,
this is easier said than done as the Finance Minister has a revenue kitty which
has virtually little to spare. Therefore, Jaitley’s objectives might not be easy
to achieve as he cannot borrow more given that the more he borrows, the more
the inflation. Apart, from causing paucity of funds for other borrowers.
Hence,
he has little room for reducing expenditure on salaries, staff benefits,
maintenance and other sundry expenses. Add to this, with expenses on police,
para-military and security growing Jaitley is facing a conflict of opening up Government
recruitment and simultaneously reducing the work force. To reduce expenses, the
Finance Minister has to cut workers and if he has to pep up development, Jaitley
needs to open up the recruitment process. Choosing either is a problem.
He might
promise to develop high
impact domains like labour-intensive manufacturing (viz. textile, footwear,
electronics assembly, etc.) and tourism. He could also think of strengthening traditional
employment bases of agriculture and allied industries, and retail through
modernization as well as stronger credit and market linkages. Jaitley might also
think of harnessing opportunities provided by upgradation of infrastructure and
housing to generate jobs.
Additionally, with the UPA leaving critical
and urgent challenges unaddressed, the Minister needs to change these, and
change now on a priority basis. Clearly, Jaitley’s Budget would be a trapeze
game as the nation awaits to see whether it would be a repeat of Vajpayee’s
Government success and has a benevolent impact. Recall, his NDA left a near
double digit growth, low prices, adequate supplies, free economy and a nation
that basked in the glory of hope in 2004. Just the opposite what UPA did. Jaitley,
it is hoped would be able to fulfill these aspirations of the people. -----
INFA
(Copyright, India
News and Feature Alliance)
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