Economic
Highlights
New Delhi, 24
January 2022
Budget Wish List
CUT I-T RATES, STOP
PSU SALE
By Shivaji Sarkar
Yet another year of uncertainty begins with
difficult finances, not so certain growth and perhaps some experimentation by the Union Finance Minister
Nirmala Sitharaman. All in the backdrop of people having major expectations.
Two years ago, on
September 20, 2019, less than 40 hours before Prime Minister Narendra Modi's
Houston event, the government announced a massive corporate tax rate cut,
lowering the base rate to 22 per cent from 30 per cent, and to 15 per cent
from 25 per cent for new manufacturing companies. Till such time individual and
tax rates were in sync.
Now people want that
synchronisation to be re-established. The individual income tax rates remain
very high at 42 per cent and 30 plus 3 per cent. It robs an income tax payee of
almost 73 to 83 per cent of his income. The aspiration is that it be lowered to
20 to 22 per cent, possibly ideally as per Chanakya principles to around 17 per
cent to help generate demand. The aspiration is because of the difficult three
years of Covid-19 uncertainty, job losses, income contraction and severe
inflation at 14.6 per cent. One wishes that the Finance Minister listens to
them.
She has her problems
of constricted finances, not the desired growth or rather uneven growth instead
of a high trajectory that could have generated jobs, increased demand, boosted
production and paved the way for demand. Though she should do that, it’s possible
she would like to avoid the call. And people should be thankful that she does
not introduce her own thought of expenditure tax, earlier rejected by many
finance ministers.
The idea evolved by
socialists finally was rejected by them. Contraction of spending is not a good
idea. Let people spend and those who can, save in classical Indian style. The
FM should rethink of incentivising savings by asking Reserve Bank of India to
raise interest rates. If she does, it would bring back the sustained growth
pattern and strengthen Indian families come out of the crisis.
The FM needs to do it.
If she had done this before, the government would possibly not have to resort
to free food, edible oil and other doles to 80 crore or 61.54 per cent of the
population. It is a benevolent approach of the government but could have been
avoided if the families had the strength. Modi told people of Gujarat on August
3, 2021 that Covid-19 has caused a body blow to the poor and government spent
Rs 2 lakh crore to provide free ration till last November. Now it is extended
to March 31, naturally incurring more expenses.
The FM should now, through
various policy formulations, try to empower the families. It may help the
country reduce these expenses in the next four to five years and aid the
country to invest in many projects and create demand.
The budget would
invest in many metro, infra projects, healthcare, railways and ports. It also
may take up the issue of regulating crypto currencies. Last year, the new National Bank for Financing Infrastructure and Development
(NaBFID), with a capital base of ₹20,000 crore and a lending target
of ₹5 lakh crore over a three-year horizon was set up. In five years, it
targets Rs 111 lakh crore investment.
NaBFID Chairman
KV Kamath says that it would require Rs 80 lakh crore in 2022-23 to kickstart
big ticket projects like high-speed railways, airports, ports, highways, river
interlinking for the national infra pipeline. Infra is critical and risky both.
Highway investments may go up by 35 per cent. The ASEAN had gone bust with high
infra investment. It aims to make it up by further asset sales of the PSUs.
It looks
interesting but the financial risks cannot be overlooked. The rise of private
at the cost of public sector has its ramification. There are proposals for
disinvesting 36 PSUs, including Central Electronics, PDIL, LIC, four major
banks by 2024. The funds through sales would only help reduce fiscal
deficit. The number of profit-making PSUs was 183 in 2017-18, 179 in
2018-19 before declining to 171 in 2019-20, said industry minister.
According to the government's new public sector policy, profit or loss incurred
by a PSU is not criterion for disinvestment anymore.
It should also
be remembered that the 2007-08 Lehman global meltdown was the handiwork of the
private corporate. The Rs 7000 crore Satyam scam in 2009 singed India as well. The
FM has to come out with a balanced foolproof system. There
are a series of promised projects for poll-bound Uttar Pradesh, Uttarakhand,
Manipur, Goa and Punjab. The strong ‘multiplier effect’ of infrastructure
spending can be realised, only if it is delivered in a timely manner and is
effectively targeted. None should get delayed or stalled.
It has to lay special emphasis
on agriculture. Procurements are on the rise but still unable to satisfy
farmers. The budget proposes to increase loan limit to Rs 18 lakh. Various
infra funding, healthcare, agriculture, small businesses would depend heavily
on banks, which are certainly not so comfortable. As per the RBI, banks have Rs
8.35 lakh crore Non Performing Assets. Even there are plans to allow youth to
have loans from banks for entrepreneurship.
Looks good. But MUDRA loans’
record is not that bright. Bad debts for Mudra loans
have spiked for PSBs, and, at the end of 2018-19 (FY19), stand at 9.3 per cent
of advances. There has been 71 per cent jump in the number of MUDRA loan
accounts that have turned NPAs in Gujarat in 2021.
India has to
invest more in healthcare. Last year by mixing figures of Ayush it projected
137 per cent increase to Rs 2.23 lakh crore funding up from Rs 94000 crore. It
had included Ayush figures too. The real rise was miniscule. Hope FM would take
more sincere steps this time as India’s public healthcare system remains
rudimentary and private system is extremely expensive and exploitative. Despite
Covid-19 situation and now Omicron, investment in the sector does not look
easy.
Creating jobs
and less reliance on the public sector are contradictory. Organisations like
PDIL are watchdogs that private or foreign investors detest. Mere infra cannot
sustain or boost job demands for long. It has to look how the medium and small
industries grow. So far the stress on MSME is a bit lukewarm. The budget has to
be more innovative. ---INFA
(Copyright, India News & Feature Alliance)
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