Budget 2019-20 certainly seeks to achieve the twin objectives of growth and inclusiveness by focussing on farms, rural economy and private investment but taxes and cesses continue to be a bother
The Modi 2.0 Government’s maiden Budget has pegged India’s finances on its villages and farms — a visible shift from the Nehruvian economic policy of promoting industrialisation. The Modi Government’s Budget was truly focussed on agriculture and rural development. At the same time, the Government wants the private sector to be in the driver’s seat. This to achieve the target of Indian becoming a $3 trillion economy in the immediate future and $5 trillion in the course of time. Finance Minister Nirmala Sitharaman said, “In purchasing power parity, we are, in fact, the third largest economy already, next to China and the US.”
This sounds good to achieve the twin objectives of growth and inclusiveness. Sitharaman’s Rs 27.86 lakh crore Budget has interesting features: It is ambitious and plans to invest widely, covering almost all sectors.
So, there were plans to boost the economy along with the empowerment of villagers, women and farmers. Schemes such as the Pradhan Mantri Gramin Awaas Yojana and the Pradhan Mantri Gram Sadak as also the Bharatmala, Sagarmala and UDAN, are designed to bridge the rural-urban divide and improve transport infrastructure. The 1.25 lakh km of roads across the country that will be upgraded entail an investment of Rs 80,000 crore.
The Scheme of Fund for Regeneration of Traditional Industries (SFURTI), launched in 2005, which envisions 100 new clusters in 2019-20, will facilitate 50,000 artisans in making the traditional industries more productive. Under the ASPIRE scheme, 100 business incubators will be set up to enable 75,000 entrepreneurs in the agro-rural industrial sector. Further, the Government plans to form 10,000 farmer producer organisations (FPOs) in the next five years, apparently with corporate interface, to ensure economies of scale for farmers over the next five years. Others like the Pradhan Mantri Gramin Digital Saksharta Abhiyan, the water conservation campaign, ‘Jal Shakti Abhiyan, which will focus on 256 districts, will spur rural growth.
Many of these schemes will help in the development of the rural sector and mitigate rural distress, bridge urban and rural divide, create demand and spur the growth of the industry and allied sectors.
All of this is fine. But the Finance Minister has thrown a spanner, too. Additional taxes, duties and cesses on the rich and on commodities such as fuel will have an inflationary effect. First and foremost, transport expenses will see a rise. Already, cess duties were high on fuel. Tolls and taxes have seen atrocious rates, too. This calls for a relook and withdrawal of the proposal to keep the economy on track as also to fulfill the vision of India becoming a $5 trillion economy.
Another decision that will have a negative impact is to raise customs duty on gold from the existing 10 per cent to 12.5 per cent. Gold is mistakenly considered an item of consumption by the rich. As a matter of fact, no marriage in poor or rural household is complete without purchasing of gold. The NDA-I of Atal Bihari Vajpayee had taken the prudent decision of having “zero duty” on gold import to keep a check on smuggling. Higher duties bode well for smugglers, who have links with gun and drug leaders as also terrorist organisations.
Though the Government’s aim is to raise revenue, it may end up increasing surveillance at multiple sectors, thus causing revenue loss. Ideally, this needs to be rolled back as losses outweigh gains. Similarly, TDS on cash withdrawals of over Rs 1 crore, not a large sum for even small businesses, to discourage business payments in cash, may actually lead to an economic slowdown. The Government should not be in a hurry to digitise the economy. Cash is the fastest transaction method. Linking it to black money — simply meaning untaxed — is a misnomer.
Let the cash lubricate and speed up the economy. Digitisation should be a normal and automatic process. Apprehensions for digitisation, too, have been raised as many Aadhaar-linked accounts are now being defrauded. The Government needs to go slow and withdraw such strange rules that make dealings and tax filing cumbersome.
It was expected that the Finance Minister would make an announcement regarding abolishing the income tax. Instead, Sitharaman increased the 15 per cent personal tax surcharge on top-end income brackets — for incomes between Rs 2 crore and Rs 5 crore, the new surcharge is 25 per cent and for incomes above Rs 5 crore, the new surcharge is 37 per cent. High taxes reduce disposable income and are a dampener for the people to consume.
The Indian economy needs simplicity in tax administration. Besides, full tax rebate for citizens with net annual taxable income up to Rs 5 is arbitrary. They, too, should be taxed as this will burden the tax office with little benefits in hand.
Taxing the bank deposits does not suit the welfare nature of the Narendra Modi Government. It may give small revenues but cause immense hardship to those who save. Savings, the Finance Minister says, have to be encouraged to boost the economy. TDS and low interest rates dampen the enthusiasm of savers. The Government’s words must match its deeds. It’s a necessity not only for the savers but for a nation that is pining for funds.
If savings are taken care of, the Government will not have to look for borrowings abroad to spur growth and fiscal management. This swadeshi move will make easy finance available to Government and save forex. The Finance Minister may do some reworking. It will contain inflation, which after this Budget, is likely to rise to 5 per cent. For a $5 trillion economy in nine years, India requires a growth rate of at least 11 per cent not eight per cent, as the Economic Survey indicated.
(The writer is a senior journalist)
