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

News Snippets

  • India becomes the first country in the world to make flashing of anti-tobacco warning on shows on OTT platforms
  • BJP says that by targeting PM Modi on his visits abroad, Rahul Gandhi is denting India's image
  • Nepalese Prime Minister PK Dahal Prachanda arrived in India on a 4-day official visit in whihc border issues and several others contentious issues will be discussed
  • Even as Home minister Amit Shah tours Manipur and holds peace talks, violence continues in the state after a lull of one day
  • PM Modi says that boycott of Parliament inauguration by some opposition parties was an insult to the nation
  • Allahabad HC upholds Varanasi district judge's order that petition for worshipping Shringar Gauri in Gyanvapi mosque is maintainable and can be heard
  • Rahul Gandhi says if PM Modi were to meet God, he is such a 'specimen' and know-all that he would start explaining to God how the universe functions
  • Deloitte raises flags in Adani Ports' dealing with three entities regarding disclosure of facts
  • Centre meets the fiscal target of 6.4% in FY23
  • Data released by NSO shows India's GDP grew at 6.1% in Q4 and 7.2% in the full year in FY23
  • IOC takes cognizance of police action on wrestlers, asks IOA to protect athletes
  • World Rapid Chess champion Magnus Carlsen says India is doing a lot of right things and will soon emerge as a powerhouse nation in chess with scores of talented youngsters
  • Thai Open badminton: PV Sindhu & K Srikanth ousted, but Kiran George stuns third seed Shi Yu Qi 21-18, 22-20
  • The lone Congress MLA in West Bengal, Bayron Biswas from Sagardihi, who won in a byelection recently, joins Trinamool, Congress says such 'poaching' not good for opposition unity
  • PM Modi says every move of his government is guided by the wish to improve the lives of the people
Excellent GDP growth: Q4 at 6.1% and FY23 at 7.2%, beats all estimates
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 governmentÂ’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.