Economic Highlights
New Delhi, 20 February 2015
NDA Budget
WILL THERE BE MAGIC TOUCH?
By Shivaji Sarkar
The
first full-fledged 2015-16 is a crucial budget to be presented by the NDA
government. Expectations would be to see it as a turning point in the economy
and political process. It should be a signature document with many surprises.
For, it has many promises to fulfill, new courses to set, create a roadmap for
investment, set the process for doing easy business, ease tax structure, create
jobs, most-favoured treatment for farm sector and many more.
The
job is simply not easy for Finance Minister Arun Jaitley. He has to achieve the
task amid the worst challenge of falling or at best stagnant revenue collection
and a diffident bureaucracy. The NDA government has the massive mandate to
steer away from the shadow of the past. Poor and rich alike want to stay clear
of the Manmohanomics, which led the country to an abyss.
The
GDP should not be a concern. It will surge if only the prescription is right.
Jaitley only needs to select the right medicines that would reduce the chasm,
bring smiles and set the economy on a free flight.
Only
two days back, he had made the right sound while launching eBiz portal for
easier business process that brings 11 Central Government services on one
platform. Jaitley said ease of doing business was not a mere concern of the
investors but also a necessity to change the face of rural economy, higher
value for land and life of the people.
India ranks 142 in the World Bank index
of doing business. Would the single window, which Jaitley says, help businesses
to work from their homes without having to make forays to the government
offices, be a success? A year ago a similar “single eWindow” launched in Madhya
Pradesh has become a bottleneck. Industry chambers say that emails sent to it
go unanswered. It is happening also at some Central ministries.
Jaitley
or Prime Minister Narendra Modi have no path of roses. Some weeks ago smelling
acute financial problems, Chief Ministers of States were called at NITI Ayog to
curtail spending. Many Centrally sponsored schemes are to be transferred to
States. The social sector spending has to be shared by them. The number of
schemes is to be reduced to around 30 from 66 at present. This may be a part of
the Government’s bid to rationalise spending, which grew by more than seven
times during the UPA regime.
This
would make funds available for infrastructure and core sector investments
--must for “Make in India”
ambition. A small beginning is attempted to be made with Rs 60,000 crore
defence industries. Modi wants India
to become a manufacturing hub for such production. The US and western powers
would not allow shifting of production bases with a mere promise of investment
avenue. The bazaar is also there, but western powers would not do much to
except for some tokenism. They would not like to weaken their stranglehold.
Would the Budget promise much more to them on the lines of nuclear liability
insurance?
Whether
that would please Indian industry or not remains to be seen. At least Chairman
of financial services giant HSBC, Deepak Parekh, who was among the first
industry leaders to openly criticise the UPA government for “policy paralysis”,
says the businessman is getting impatient as despite optimism it is not
translating into revenues. Indian industry wants a lot more.
The
Budget has to promise concrete action. The path to de-bureaucratise has to be
set. The Prime Minister has to ensure that officialdom does not become the road
block once again. Modi has to ensure demolition of the bureaucratic
inspectorate. It has to begin with the income-tax department, which with its
heavy structure has become the revenue guzzler and not earner.
Its
latest ploy to equate tax not paid as a “criminal offence” if accepted would
make all works and businesses “illegal”. It would make its officers much richer
as they would be able to squeeze everybody. Thus, the best course is to abolish
income-tax. It makes business sense. It would lead to an end of 95 per cent of
black money.
The
Income Tax department gets Rs 1.75 lakh crore-odd revenue but almost Rs 70,000
crore is refunded every year. But with increased manpower, paper work and prosecution
of the honest citizen, it spends over Rs 2 lakh crore. The additional money
with the people would boost demand and help manufacturing. In reality, if the
I-T department staff is pruned to one-third to manage indirect taxes, the
government would have to forgo not more than Rs 50,000 crore of revenue.
However,
the government would not do that. It is slated to raise the I-T slabs a bit.
May be instead of Rs 20,000 a month income, one would have to pay a tax at Rs
25,000 and if the government is bolder a little more.
The
government also needs to take another bold step. It must withdraw cases filed
against poor salaried people for taking interest-waiver on housing loans. It
should also do away with all I-T cases that are more than seven-year-old whatever
their merit. It would save Rs 2 lakh crore.
It
should also introduce penalty for I-T officers for raising demands that have
already been paid or any false demand. It is a blatant way of harassment of the
tax payers and a process of gratification.
This
is the grouse of the business. It is just not the “direct” retrospective tax,
even the lowest salaried man has been suffering at the hands of the I-T.
Estimate the stupendous loss of lakhs of citizens making forays to the I-T
offices in terms of money and man-hours. People may have to settle with some
indirect tax concessions and incentives for savings.
At
the same time, it is likely that railway fares would be raised and many other
services, including telephony, would become dearer with the “widening” of the
tax net.
If
Modi wants business and citizens to remain in peace, he would also have to
utilize almost Rs 1 lakh crore collected as road cess from petroleum sales.
Simultaneously, he has to ponder how to remove highway toll. The UPA had done a
wrong, Modi needs to correct it.
Prices
and the rupee should be a concern. World commodity prices are crashing. It is
not happening in India.
Roadmap for strengthening the rupee is essential to give the economy a boost. A
weak rupee has not boosted exports since the first devaluation in 1965.
Still
there are dreams about this Budget. People want to see the magic wand.--- INFA
(Copyright, India
News and Feature Alliance)
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