oppn parties Budget in the Times of Revenue Squeeze and Impending Elections

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  • Supreme Court sentences Congress leader Navjot Singh Sidhu to one year rigorous imprisonment in the 1988 road rage case
  • Home Minister Amit Shah says rights should not be demanded before fulfilling responsibilities and that universities are no place to wage ideological battles
  • NIA court convicts JKLF chief Yasin Malik in terror funding case after he pleads guilty of all charges
  • A study backed by PM-EAC has recommended universal basic income and urban job guarantee and greater spend on social sector schemes
  • Supreme Court rules that the decisions of the GST Council are not binding on the Centre and the states, leaving the door open for states to levy further taxes
  • After sustained campaign by BJP MP Arjun Singh, the Centre today withdrew the jute price cap order, industry welcomes move
  • Akasa Air might postpone its July launch due to late arrival of aircrafts
  • Metro Cash & Carry decides to sell Indian operations. All major players, including Reliance retail and Amazon, are likely to bid
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  • IPL: RCB crushes GT by 8 wickets as Virat Kohli returns to form with a well-made half century
  • Nikhat Zareen is world champion in flyweight category. Wins gold at Women's World Championships at Instanbul
  • Supreme Court uses its special powers under Article 124 to release A G Perarivalan, a Rajiv Gandhi assassination convict
  • Indrani Mukherjea, prime accused in the Sheena Bora murder case, gets bail from Supreme Court after 6.5 years in jail
  • Hardik Patel quits Congress, says top leaders distracted by mobile phones and state leadership busy arranging 'chicken sandwiches' for them
  • Anil Baijal resigns as Lieutenant Governor of Delhi citing "personal reasons"
Nikhat Zareen is crowned world champion in the flyweight (52Kg) category at the Women's World Championships in Istanbul /////// Supreme Court sentences Navjot Singh Sidhu to rigorous imprisonment of one year in the road rage case /////// Sunil Jakhar, who quit the Congress a few days ago, joins the BJP
oppn parties
Budget in the Times of Revenue Squeeze and Impending Elections

By Sunil Garodia
First publised on 2018-01-31 18:37:56

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.
The budget tomorrow can take the shape of a political document rather than a financial one. While that is mostly the case in the last year of any government’s term, as long as it keeps fiscal prudence in mind, one cannot find fault with it. This government faces the dilemma of a revenue squeeze while presenting its last full budget. Hence, the finance minister might indulge in upping the deficit to more than 3.5% of the GDP, which might not be a good thing to do. A small amount of deviation, say up to 3.3% or even 3.4% is tolerable since the economy badly needs investment from the government to create jobs but anything above that will disturb the financial markets. It will also lead to more fiscal indiscipline in future.

The contours of the budget are becoming increasingly clear. Given large scale farm distress all over the country, this budget will be largely farmer oriented. Since the Indian economy is driven by agriculture and the farm sector employs a huge number of people, taking care of the sector solves many problems afflicting the economy. But the finance minister has to eschew populism of the kind that gives free power or writes off bank loans to farmers. Concrete proposals that make for sustainable livelihood are more likely to solve the problems of farmers rather than petty handouts. Something also needs to be done about the farm produce marketing and supply chain. A lot is added on produce from farm to table and the farmer gets only a small percentage of it. The rest is cornered by middlemen. This has to be reversed by suitable marketing policies.

Then although the prime minister had promised to cut corporate tax rate to 25% (it is already so for companies earning less than Rs 50 lakhs), the revenue squeeze might delay it by another year. But analysts have pointed out that if taxes are not lowered new investments might not come in and there might even be flight of capital to countries that have already lowered corporate taxes to 17%. Hence, the finance minister will have to find a way to make up the losses due to lowering of corporate tax and make good the promise the prime minister made.

Further, given the woeful condition of public health and education systems, the government needs to increase spending in these sectors. But for long we have seen that money is being spent without accountability, leading to non-existent schools and hospitals. Henceforth, there should be proper checks in place to ensure that money spent results in creation of lasting assets of value rather than going into the pockets of crony capitalists. Social audit of money spent on welfare schemes is a must and it should be an ongoing process. Funding should not be taken for granted by the recipients.

Finally, the finance minister will also need to placate the salaried and middle classes who have been crushed under rising prices of essential commodities. There is talk of standard deduction for salaried employees making a comeback. This will be a sensible move and will benefit a large section of the people. Further, the exemption limit has not been raised for long. Given inflation, it should now be raised to Rs 3 lakhs from the existing Rs 2.5 lakhs. Tax slabs and rates were modified last year and there is no need to tinker with them. The finance minister will have to provide relief all around but will have no such luxury for the government. Let us see what magic wand Arun Jaitley has.