Economic Highlights

New Delhi, 14 July 2014

Jaitley’s  Budget

TOWARDS HAPPIER TIMES?

By Shivaji Sarkar

The Prime Minister Modi Government unveiled it much-awaited nascent Union Budget last week. All were agog whether it would inject the much-needed boost to a stagnant economy. Find a solution by infusing massive investment, creation of jobs and turning the economy around. Finance Minister Arun Jaitley did not disappoint and took the plunge by zeroing in on the kitty available which his predecessors were oblivious of to spur domestic investment in the economy. By asking public sector undertakings, who sit over huge reserves, to invest Rs 2.47 lakh crores.

Undeniably, the Finance Minister has tried to please too many protagonists of River Ganga (Rs 2037 crore) to Hindutva icons like Shyama Prasad Mukherjee, Deendayal Upadhyay and Sardar Patel as also the common taxpayer. His overhaul left nothing untouched.

Indeed, Jaitley has gone out of the way to ensure that the BJP’s pro-poor image does not get a beating especially against the backdrop of ensuing Assembly elections in Maharashtra, Haryana, Jharkhand and J&K.  He has left subsidies untouched, maintained funds for MNREGA, raises interest subvention on home loans, personal income tax exemption limits and announced several social welfare schemes.

Goods used by the aam aadmi like footwear, TVs, footwear, stainless steel utensils, computer components, diamond and gems have become cheaper. The FM has also laid additional stress on savings through revival of the National Savings Scheme of the 1960s and tax exemption for savings up to Rs 1.5 lakh.

Notably, Jaitley has tried to recreate the principle to ensure the so-called Hindu rate of growth, a low but constant growth coupled with a mix of development of the masses. By amalgamating domestic savings which used to fund Government’s welfare programmes during the Socialist budgetary era of Nehru with a new reforms programme, a suggestion harped on by BJP’s ideological ally Swadeshi Jagran Manch for long.

Pertinently, the farm sector has got the Government’s attention. It has projected a 4 per cent growth of agriculture through a technology-driven second Green Revolution, an indication that possibly the farmers worse days are over. They might no longer have to commit suicide as 13,000 did last year. The Rs 500 crore price stabilization fund is aimed at mitigating the risk of price volatility in agriculture produce.

Recall, two similar funds were set up by the erstwhile Vajpayee Government which helped tea and coffee growers despite raising prices for consumers. But Jaitley asserted this fund would keep a check on prices as well. Simultaneously, Prime Minister Modi’s dream of following the Gujarat pattern of soil testing system has been given the go by; instead an additional Rs 56 crore was allocated to set up100 mobile soil testing labs.

Major change has been made to focus on MNREGA. Whereby, the scheme has now been linked to the farm sector and rural asset creation. Given that farmers had long been complaining that MNREGA had made labour expensive and unavailable during the peak harvest and sowing seasons. This might help reduce corruption as well, whereby only one family got 900 days of work!

A Rs 1000 crore irrigation scheme, agritech infrastructure fund, national adaptation fund, development of indigenous cattle breed with an initial allocation Rs 50 crore, Agricultural Universities in Andhra and Rajasthan, Horticulture Universities in Telengana and Haryana; and farm research institutes in Assam and Jharkhand are expected to give new direction to the farm sector.

Similarly stress on organic farming in the North-East is likely to change production patterns. Besides, Rs 8 lakh crore has been set aside by NABARD and public sector banks for farm credit. A new TV channel would be dedicated to disseminate information to farmers.

Importantly, Jaitley has shown some continuance in policies by raising FDI limit from 26 per cent to 49 per cent in insurance, defence, and e-commerce retail --- an indirect route for FDI in retail. Also, public-private partnership (PPP) in shipping, inland navigation, airports and roads sector.

Nevertheless, it is to be seen whether domestic investments through PSUs and other projects turns over the economy or leads to rise in FDI. This mix is likely to ensure a check and balance. Jaitley’s FDI move might inspire Indian corporates to invest their reserves in the country, instead of abroad.

This prescription, Jaitley hopes, would start a flurry of activities and create jobs. Remember, the Economic Survey has been consistently critical of the economy being in mess wherein no jobs were created. Despite 55 per cent growth, the service sector too did not create many jobs and remained confined to 44 per cent.

Undoubtedly, the Government has little funds. Whatever little was available was within limits set by the interim UPA budget in February. However, the FM has managed small moneys, Rs 100 crore each for 29 schemes by re-engineering Chidambaram’s interim budget. This is a policy change, which a Government interested in serving the people has done. Each of 29x100 programmes is somewhere part of the BJP manifesto and also aimed at serving its political constituency.

Significantly, UP which added 71MPs to the BJP kitty has got a bonanza. An  AIIMS in to be set-up in Purvanchal, eastern UP, Rs 50 crore has been earmarked for Varanasi and eastern UP weavers renowned for exotic saris. The new textile cluster would help zardozi craftsmen in Bareilly and chikan work in Lucknow.

The Buddhist tourism circuit would also benefit the State from Kapilavastu, Sarnath (Varanasi), Sravasti in east UP to Mathura in the west which are associated with Lord Buddha. Besides, a metro for Lucknow has also been announced. Bringing smiles to Union Ministers Rajnath Singh and Santosh Gangwar as the benefit would be in their constituencies. UP has also set to gain from the largesse to the power sector.

Further, programmes like the Rs 500 crore for displaced Kashmiris (read Pandits) to return to their homeland, AIIMS in Maharashtra’s Vidarbaha, West Bengal and Tamil Nadu are targeted to keep new voters and possible allies happy.

The 100 proposed smart cities have been allotted Rs 7060 crore. This is aimed at creating new urban hubs and would be supplemented by the Shyamaprasad Mukherjee Rurban (rural-urban) project to be funded by the PPP mode.

Alas, poor bank depositors were hoping that Jaitley would abolish tax deducted at source (TDS) from bank deposits which resulted in suffering as many of them cannot fill the income tax declaration. Not only leading to Rs 1000-5000 losses in TDS but also making recovery a complicated and expensive process. The Finance Minister still has time to make this small amendment and free interest earning up to Rs 3 lakh from the scope of TDS.

Clearly, Jaitley’s budget despite the limitation of the interim budget has tried to set a new direction for the economy as also ensuring benefits to almost all sectors. If it goes as he wishes, the 2015 budget might clear the path to revival of growth and development, thereby setting sail for happier days! ---- INFA

(Copyright, India News and Feature Alliance)