Options for Jaitley’s fourth budget

G. Srinivasan

With less than a week to go before the Narendra Modi government presents its penultimate budget to Parliament on February 1 for the fiscal year 2017-18, the Union Finance Minister Arun Jaitley appears to be satisfied with the finer details he has dovetailed into the budget when he posed for the traditional halwa ceremony! Now that the budget is prepared and is under print with more than a hundred officials from the North bloc cooped up in the Raisina Hill, there is no point in speculation as to what would be the contours and colors of this budget, considering the fact that the feisty Finance Minister has not had any memorable one in the past couple of years when he donned the role and responsibility of the ace man in the Finance Ministry.  No doubt, the Modi government spared itself any ignominy of getting bogged down in corruption or scams even as it experimented with a great gambit of demonetising high value notes that had accounted for 85 per cent of the country’s notes in circulation and in an economy which is more than 90 per cent cash-driven.
Post-demonetisation after the agony people of all walks underwent in standing in the queue to get their own money from the banks with the latter working only to cope with the currency exchange and deposits of the public, leaving their core areas pigeonholed or attended to in a perfunctory fashion, not much was happening in the economy after November 8, 2016.  Even the Central Statistical Organization (CSO) came out with an advanced revised GDP growth of 7.1 per cent for the current fiscal not factoring in the demonetization-induced slackness in activities in the real sectors of the economy.
Even as demonetisation was putatively meant to  make house cost  affordable by ridding the menace of black money that was in full pelt in this domain, housing sales in October-December quarter of 2016  plunged by a whopping 44 per cent in the largest eight cities which is again a record of sorts in the last 16 years. Yet another barometer of somber business operations emanated from the survey of the All India Manufacturers’ Organization (AIMO), hosting small and medium units, which showed that revenue had plunged by 50 per cent and jobs by 35 per cent among its member enterprises.  The fact that a lot of reverse migration from cities to the rural hinterland supervened because the latter people could no longer stay in urban conurbations for want of wages and lack of employment opportunities only reveal the implicit grim reality. With the economy struggling to revive itself under the enforced slackness due to demonetization that would definitely leave its repercussions for at least two to three quarters, what sort of gravy measures the budget could devise to spur activities in the economy?  If public investment is to be stepped up as it had been the wont of this government going by its immediate past records, how the resources could be gleaned without subjecting people to unduly harsh tax burdens is an open secret. It has been leaning heavily on non-tax revenue such as disinvestment and proceeds of auction of natural resources including spectrum sales. In fact, the proclivity of the Centre to augment cess and surcharges on income tax and other Central taxes like swacch bharat cess, krishi kalian cess which it is under no obligation to share with the States as per Article 270 of the Constitution is budgeted at a massive Rs 2, 51,481.23 crore for the current fiscal, as disclosed by the Minister of State for Finance Mr. Arun Ram Meghwal in a written query in the Lok Sabha on December 9, 2016. Probably with the GST deadline pushed to July 2017, the Finance Minister will have leeway to tap this for the next fiscal too till all the indirect taxes are subsumed into the GST.
Similarly the NDA Government, unlike the UPA government, did not dilly-dally on the disinvestment of the Central Public Sector Enterprises (CPSEs) as it was able to obtain Rs 24.349 crore in 2014-15 in its very first year and Rs 23,997 crore in 2015-16, though the target was Rs 43,425 crore and Rs 41,000 crore respectively.  These targets excluded strategic sale target of Rs 28,500 crore for 2015-16. In the current fiscal against a reduced PSU disinvestment target of Rs 36,000 crore but an additional Rs 20,500 crore for strategic sale target, the government had netted Rs 21,401 crore and Rs 2096.35 crore respectively by mid-November 2016.  So working on the twin track of ‘minority stake sale’ and ‘strategic  disinvestment’, the pro-business NDA government  does not suffer any socialist shibboleth of carrying on with the deadwoods in the public sector. The forthcoming budget might see more such PSUs getting lined up for stake/strategic sales for fetching non-tax revenue unobtrusively.  But the sale of the family jewels or even a part of it needs to be ensured at a remunerative way lest the government’s expanding welfare programmes get adequate funding so that social upheavals should be obviated, if not obliterated.
With five crucial States going to the polls in the immediate aftermath of the budget, the agrarian agony needs to be addressed in a subtle way lest the farmers voting in most of these not well developed States should be appeased. Already, the Prime Minister unveiled in December a raft of  pro-farmer measures including easy access to loans from cooperative societies, providing RuPay debt cards to 30 million kisan card holders and an interest waiver for two months for those who had taken loan for their rabi crops from district cooperative banks.
With the Hobson’s choice of appeasing the large swathes of the country’s population post-demonetization, the Finance Minister may well miss out on the big bang policy reforms for which investors, both domestic and foreign, would have scant option but to remain sore and sulking. (IPA)

Tuesday, 31 January, 2017