Economic
Highlights
New Delhi, 21 January 2019
Pre-Election Budget
POPULIST &
POLITICAL IT MAY BE
By Shivaji Sarkar
In the midst of an election year, this time
the Union Budget though technically may be slated as “interim”, but practically
it is likely to be a full budget, with if not major ones at least many populist
announcements. Plus, it will be another first for the Modi government after it shifted
the presentation of the Budget to February 1, instead of the last day of the
month.
Even if a government returns to power in an
election year, the practice has been to present the interim budget and the President’s
address would be put off to the first session after the new government takes over.
As per practice, a
vote-on-account or approval for essential government spending for a limited
period is taken before the polls.
Article
87 of the Constitution provides two occasions when the President specially
addresses both Houses of Parliament. He/she addresses both the Rajya Sabha and
the Lok Sabha at the beginning of the first Session after each General election
when the reconstituted lower house meets for the first time. The President also
addresses both the Houses at beginning of the first session of each year.
This
time after many elections, the government is opting for the latter option to
exude confidence and give a pregnant political message that it is coming back
to power after the polls. The Opposition may protest but that would be for
academic purposes. And, unlike other election years, this year the session
would not be in continuation of the Winter Session, as it was prorogued
mid-January to help the government re-promulgate some ordinances, including one
on Triple talaq.
There
is no constitutional bar on making announcements as well. The advisors of the
government have suggested making the best use of this window period. The
President’s speech essentially highlights the Government’s policy, priorities and
provides a broad framework of the government’s agenda and direction. So the
unfinished agenda could be completed to attract the people rather the voter.
That is a tall order.
Undeniably,
the recent State Assembly elections brought to the fore a growing discontent
among the public. The core assessments within the Parivar have sent out warning signals on the Government’s
performance. It is only likely that heeding to the advice, the Budget could
have a more expanded section of tax proposals, including a number of direct tax
announcements.
Industry
organizations such as the FICCI and CII have paved the way for announcement of
populist measures, particularly on direct taxes. The former has suggested raising
the 30 per cent tax rates to individuals earning of over Rs 20 lakh a year,
from the current Rs 10 lakh. It also suggested a cut in corporate tax to 25 per
cent. The CII is for giving more benefits to the employees and retired persons.
It demands Income Tax exemptions on medical reimbursements and hospitalisation
expenditure for treatment in India or abroad. There are suggestions also to
avoid double taxations on items like Provident Fund.
Transporters
have been demanding removal of toll gates. They are prepared to pay one-time
fee on each of their vehicles. The tolls have been causing congestion and
adding to their travel time, mounting heavy expenses despite online tags.
Besides, Rs 1.13 lakh crore is being collected through Rs 8 a-litre road cess
on petrol making tolls unnecessary. As a result both the Government and NHAI
are making huge profits.
Since
the farmers and rural voters tilted the balance in the recent State elections, both
the Agriculture Ministry and NITI Aayog are debating and discussing
possibilities for announcement of a farmer income scheme -- a la Telangana
pattern -- on the basis of their land holdings. There may be proposals also for
helping the farming class in their marketing endeavours.
Besides,
there are complaints of tax notices being served on Start-ups. This has caused
annoyance. Simplification of procedures may be considered and a tax holiday may
be announced.
In
the previous Budgets, the middle class particularly felt ignored. It has the capacity
to create political atmosphere and along with the farmers is piqued at the
continuous increase of petroleum prices. Notably, the recent hike in diesel
prices, have hit both the farmers and transporters hard. They may be expecting
a relief. The simplest is to bring the products under GST. However, the Government
may avoid doing it and instead, may announce relief to petroleum companies for
investment in exploration and their marketing activities.
The
proposal looks “rational” as the country needs more of oil. But it is also to
benefit some large private companies, which want to invest in the sector. Besides,
petrol price hikes are also said to have been done to benefit them.
Then
in the midst of hue and cry on the quixotic order of the National Green Tribunal
(NGT) scrapping of ten-year-old vehicles, there could be an announcement. Some
government agencies have also told the Government about the impractibility of
this order, wherein policing and impounding of such vehicles is more expensive.
In addition, destroying the cars needs money and they have said that the junk
itself would be an environmental hazard. It is also sending a negative message,
which may be corrected.
On
the banking side, there are demands for allowing banks to accept more cash for
transfers and ease online transfer rules. Presently, businesses and traders are
finding it difficult to transfer their cash earnings from remote areas even to
their own accounts. As per present government orders, banks do not allow cash
transfer through NEFT/RTGS. This has led to a thriving parallel banking system,
which is causing great annoyance. The business class has told the Government that
this generates more black money instead of preventing or checking it.
Therefore,
the Government has also been told to encourage more cash transaction for ease
of doing business, make bank’s KYC rules simpler, base it on the permanent
account number (PAN), which is linked to Aadhaar and do away with cumbersome
procedures every now and then. Then the World Economic Forum has said that
India’s cyber transaction system is fraught with risk. This has also led the
businesses to stress on cash transactions and they say that this would not lead
to any “black” transactions.
Importantly,
it is no secret that cash has been and is being used in elections. Before Assembly
polls the Reserve Bank of India noted huge cash withdrawals and this only
proves that the purpose has not been served. The list is indeed long. The
government may not cover all of it, but it is unlikely to lose an opportunity
to pander to the people’s wishes and reap benefits at the hustings.---INFA
(Copyright, India News & Feature
Alliance)
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