While following the beaten track, Arun Jaitley’s budget differs in one respect from the past UPA budgets. It focuses on investment rather than consumption to accelerate growth. It is a budget made perhaps in the PMO as it aims to implement Modi’s agenda: more money/tax breaks for “Make in India”, Swachh Bharat, Ganga cleaning, Skill India, Digital India, tapping black money and promoting tourism. Apart from the much-needed thrust on infrastructure the fresh initiatives on curbing black money, discouraging gold imports and promoting low-level entrepreneurship are commendable.
The Finance Minister has lavished concessions on the corporate sector to boost investment and push growth beyond 8 per cent but left individual taxpayers out in the cold. No immediate relief for the salaried class except for those opting for health or pension schemes. The corporate tax will be cut from 30 to 25 per cent in four years. GAAR has been deferred by two years. Courts will have separate divisions to handle commercials disputes. There is a promise of a monetary policy overhaul, a public debt management agency, a bankruptcy code and improving the over-all ease of doing business. The same generosity is missing for individual taxpayers who will have to make investments to gain concessions. Why are exemptions bad for business but good for individuals? For individuals smoking, eating out and air travel will become more expensive and only a few things like electronic and IT items and footwear will be cheaper. Any transaction above Rs 1 lakh will require the PAN, putting the fear of the law in the mind of even the buyer of a cheap used car and involving state machinery to track and punish violations. Incidentally, the government has decided not to challenge tax dispute verdicts favourable to companies.
While following the Western model of economic growth launched by Dr Manmohan Singh, the BJP has embraced Sonia Gandhi’s socialist agenda, perhaps due to the electoral setback in Delhi, disregarding the Congress plight after playing politics of appeasement. Real empowerment of the poor lies in ensuring affordable healthcare, quality education and skill training. There is no fiscal boost to rural education, public health and agriculture which supports 60 per cent of the population. Both Jaitley and Modi have missed a chance to cut government expenditure and role, and shed administrative flab. India remains what The Economist called the caged tiger. The BJP could have done what the Republican Party does in the US: lower taxes (for individuals and corporates), minimum state role (fewer controls and regulations) and created a liberal business and individual friendly environment. It has neither played a good Republican nor a true Democrat, which genuinely looks after the interests of the middle and poor classes.
(Courtesy: The Tribune)