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

News Snippets

  • In a first, the Supreme Court recognizes marital rape, although for the limited purpose of allowing married women the right of abortion up to 24 weeks if they conceived as a result of forced sex by their husbands
  • Air India cuts discounts on base fare to students and senior citizens from 50% to 25%
  • Mallikarjun Kharge and Digvijay Singh are being touted as frontrunners to take on Shashi Tharoor in the elections for the post of Congress president
  • Sonia Gandhi will decide who will be Rajasthan CM if she feels there is a need to change guard after the near-rebellion by MLAs in the state
  • Ashok Gehlot bowed out of the race for being Congress president after meeting Sonia Gandhi
  • India has moved to the 40th spot in the innovation index, up 6 spots from last year
  • DGGI has alleged that top insurance companies, banks and NBFCs has committed a fraud of Rs 800cr by claiming input tax credit without underlying supplies
  • The Centre will borrow Rs 10000cr less than planned earlier due to good revenue collections
  • At $23.9bn, India's current account deficit widened to 2.8% in Q1, the worst in four years
  • Stocks continue to flounder on Thursday: Sensex sheds 188 points to 56409 and Nifty 40 points to 16818
  • The 36th National Games were declared open on Thusrday by PM Modi in front of a record crowd in Motera near Ahmedabad
  • Jasprit Bumrah most likely to miss T20 World Cup due to recurrence of back injury
  • PFI's political wing, the SDPI is on EC radar and action will follow soon if discrepancies are detected
  • Ashok Gehlot to meet Sonia Gandhi today, says all issues will be sorted out soon
  • Referring to the PFI ban, most Muslim organizations ask the government to take similar action against right wings organizations like the RSS, Bajrang Dal, VHP and the like
In a landmark order, Supreme Court rules that all women, married or unmarried, are entitled to safe and legal abortion up to 24 weeks of pregnancy as per the MTP Act
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.