WAQUAR ANWAR analyses the Union Budget 2018-19 and points out big holes in the provisions.
Creating hopes, fixing goals and fixing targets are required for any planning, including an exercise of budget presentations. But these should be backed by proper homework and provisioning. Otherwise this all amounts to day dreaming, wishful thinking and a mere marketing exercise. This appears to be the case with the budget speech of Arun Jaitley, the Finance Minister (FM). A number of announcements made in the speech are not in consonance with the provisions made in the quantitative part of the budget.
A budget is basically a quantitative statement and the speech is supposed to be an explanation of the entries made therein. The classic case of this mismatch is the grandeur healthcare scheme, being dubbed as Modicare, in line with the Obamacare in the US, whose benefit, if we literally go by the budget speech, is supposed to percolate to fifty crore Indian citizens and which shall be the biggest such scheme in the world. Instead of making matching provisions in the budget, the FM informed, “Adequate funds will be provided for smooth implementation of this programme.” So it is in the future tense!
Another example is the announcement relating to Minimum Support Price (do not correlate MSP for the farmers at the rate of one and a half times of production cost). Instead of making provisions in the budget or spelling out its modalities, the FM said, “Niti Ayog, in consultation with Central and State Governments, will put in place a fool-proof mechanism so that farmers will get adequate price for their produce.” This too is not in the present tense! An Urdu poet has described this situation aptly:
Khawb ka rishta haqeeqat se na joda jaye; aaina hai ise patthar se na toda jaye (Do not correlate dream with reality; This is a mirror not to be broken by stone),
Union budget is an annual exercise. So normally it is understood that the timeframe for its implementation shall be one year. However, for projects encompassing more than a year, be they of deferred or capital nature, their sunset should be mentioned. This is particularly required in our present practice wherein economy is done away with.
ELECTION YEAR BUDGET
One may appreciate various constraints of an FM including revenues for making provisions. One such constraint is that of election tear. It happens in all democracies, big or small. The Indian Express has this interesting thing to report, “In the 35 minutes of Jaitley’s 105-minute Union Budget speech there were 38 references to the word “agri,” 39 mentions of the word “farm,” 35 references to “rural.” It had a clear political overtone.” One may disagree with the inference of the newspaper or reinforce it with the fact that as the ruling political establishment lost its hold in rural areas in Gujarat in the recent elections, it had to go extra miles to reverse the loss of face.
REINVENTING THE WHEEL
One old scheme has been revived. It is standard deduction for salaried tax assesses.
This blanket deduction of Rs. 40,000/- is in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. However, the transport allowance at enhanced rate shall continue to be available to differently-abled persons. Also other medical reimbursement benefits in case of hospitalisation, etc., for all employees shall continue. The net tax benefit is negative to persons who are not differently-abled.
Another old scheme reintroduced is the provision of Long Term Capital Gains (LTCG) taxing gains made by selling shares even after holding them for more than a year. This will hit stock market investors. However, the gains up to 31st January, 2018, would be grandfathered. It means that the market price of shares as on that date shall be the reference for computing any gain in sale of share on any future date.
ALL IS NOT UNWELL
There are a number of noteworthy, if not praiseworthy, provisions of the budget. Some such features are noted hereunder in brief.
126.2017-18 Budget Estimates for disinvestment were pegged at the highest ever level of Rs.72,500 crore. “I am happy to inform the House that we have already exceeded the budget estimates. I am assuming receipts of Rs.1,00,000 crore in 2017-18. I am setting the disinvestment target of Rs.80,000 crore for 2018-19.”
Farmer Producers Organisations (FPO): Indian economy has witnessed success stories in schemes like “Operation Flood” under cooperative banner. Our dairy industry, under the leadership of a visionary named Kurien, has become a market leader in its area beating all competitions from other sources, including multinational brands. A scheme named “Operation Green” on that line is proposed for farmers and the tax benefits available under cooperative sector shall be passed on to the Farmer Producers Organisation. A sum of Rs. 500 crore has been earmarked for the purpose.
Crypto-currency: Finance Minister has categorically stated that there is no place for crypto-currency in India. Earlier it was reported that the Income Tax Department is keeping an eye and tracking such shady deals. This clarion call was needed and it gives a message that India is for clean economy and everything unfair stands cleansed.
Research Fellowship: The Government would launch the ‘‘Prime Minister’s Research Fellows (PMRF)’’ Scheme this year. Under this, 1,000 best B.Tech students each year will be identified from premier institutions and provided facilities to do Ph.D in IITs and IISc, with a handsome fellowship. It is expected that these bright young fellows would voluntarily commit a few hours every week for teaching in higher educational institutions. However, one would like to add a note of caution that this scheme would not replace the existing system of research fellowships available in our universities under the various UGC plans. The new announcement should be welcomed only if it is an add-on. There is a serious question mark if this becomes a guise for replacing existing facilities.
Alternative Investment Fund: India needs alternative investment schemes for bigger role of equity funds. The budget discusses innovation required in Venture Capital Funds and the angel investors and special developmental and regulatory regime for their growth. The FM assured that additional measures to strengthen the environment for their growth and successful operation of alternative investment funds in India will be taken. The present scheme for venture capital and angel finance are not conducive, particularly from tax liabilities thereon, and a bold and clear innovation is called for. However, it needs to be assured that these alternative modes are used squarely for equity modes of finance as there already exist a number of schemes for debt needs of the industry.