Preparing a Budget means devising an economic strategy of making most revenue for the state and allocating money and resources to various sectors for keeping economic activities vibrant by ensuring optimum utilisation of all wealth to promote a happy, productive and peaceful life for all citizens.
Thus, Budget of a sovereign Government expresses strategic plans of business units, organisations, activities or events in absolute measurable terms. In developing agrarian economies, poverty alleviation, employment generation, universal education, quality affordable healthcare do take primacy. Ignoring these core sectors makes any Budget anti-people.
Sustainable environments, back-to-village incentives and promotion of small entrepreneurial ventures across the country should turn India a happier place to live in. Though large-scale manufacturing activities do create wealth and some job opportunities, bland economic growth has been seen to have degenerated societies. Successive Governments have failed to incorporate critical components that improve the quality of life which is what makes any location more livable than others.
The Government Budget which is only a summary plan, has three major aspects: Operating or current budget, capital or investment budget and cash or cash flow budget. The Budget is prepared by the Budget Division Department of Economic Affairs under the Ministry of Finance annually by a team of Indian Economic Service officers guided by the Chief Economic Advisor. The team sometimes places an Economic Survey Report to make the Budget components appear logical. Chief Economic Adviser Arvind Subramanian says the adverse impact of demonetisation on GDP growth is a temporary phenomenon, advocating the concept of Universal Basic Income (UBI) as the best social welfare scheme in an effort to reduce poverty.
Economic Survey highlights:
· GDP growth to dip to 6.5% from 7.6 per cent; economic growth to stabilise at 6.75- 7.5 per cent.
· Big fiscal windfall from Pradhan Mantri Garib Kalyan Yojana and low oil prices.
· Farm sector growth to rise from 1.2 per cent to 4.1 per cent.
· Fiscal gains from Goods and Services Tax (GST) to come a little later.
· Industrial sector Growth rate to slide down from 7.4 per cent to 5.2 per cent.
· The message ruling political masters are trying to transmit:
· Cutting down Individual I-T rates and real estate stamp duties; Income Tax net to gradually trap all high-income communities.
· Acceleration of the time table for cutting corporate tax.
· Reforming tax administration to reduce discretion and improve accountability.
· Quick circulation of new currency to bring growth rate to normal levels.
· Reforming GST, and such other structural domains to boost growth rate to 8-10 per cent.
· Fiscal windfall from Pradhan Mantri Garib Kalyan Yojana.
· Oil prices getting lower.
· Farm sector growth at 4.1 per cent, up from 1.2 per cent last year.
· Demonetisation-affected supply of agricultural products like sugar, milk, potatoes and onions to improve very soon.
· Growth rate of industrial sector to be moderated at 5.2 per cent from 7.4 per cent.
· Collection of taxes on disclosed and undisclosed wealth shall not cause tax harassment to ordinary citizens.
· Universal Basic Income Scheme is the best poverty alleviation strategy.
No matter what, the ordinary citizens remain anxious about tax exemption, transport allowances, increase in home loan rebates, farm subsidies and issues of women and senior citizens’ tax structures.
Bitter critics of the Modi administration say the situation today is worse than the worst years of the UPA regime. Unless the private sector booms with increased Budget allocations for capital spending, especially in the areas of infrastructure and housing, much may not happen in reviving growth. The Federal States too are badly short of funds after the Centre rejigged allocations for projects covered under the Five Year Plan.
The reluctance of the private sector to invest more remains high due to gloomy consumer spending and business-inimical policy changes. Business confidence has been hit by a growing sense of disillusionment over the pace of key policy reforms.
The Federation of Indian Chambers of Commerce and Industry (FICCI) believes business confidence has diminished from the five-year high when Modi came to power in May 2014, The post-demonetisation shock data are yet to come; the situation has slipped back to where it was during the so-called “policy paralysis” phase of the UPA Government.
There isn’t much that Jaitley can do to boost consumer spending even if the Government plans to bring in place the Goods and Services Tax in July. It would not be prudent to make any cuts in indirect taxes ever. The Budget might have offered some tax concessions to the middleclass and smaller enterprises. but Jaitley will have to find enough money to spend on all the rural schemes to gain credibility with the sole view to winning votes in Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur.
The Budget focuses on a ‘less cash’ economy and allocation of more money to the rural sector, affordable housing and public infrastructure for gaining popularity. But the task is certainly uphill.
The public exchequer expenditures are kept in two categories, ‘Plan’ and ‘Non Plan’, previously called ‘development’ and ‘non development’ expenditure respectively until the Sukhmay Chakraborty Committee changed the expressions in 1978-79. Plan expenditure is made on tangible assets related to economic development.
Non-Plan Revenue Expenditures:
· Interest payments on the loans taken by the Centre
· Expenditure incurred on Defence Services (except Defence Equipment which is a capital expenditure)
· Subsidies
· Grants to the States and UTs, including those from calamity fund
· Pensions, social services like healthcare, education, social security
· Police
· Economic services such as agriculture, industry, power, science & technology
· Grants to foreign Governments
Important Non-Plan Capital expenditures are:
· Defence equipment and modernisation
· loans to public sector companies
· loans to States and UTIs
The plan components relate to items dealing with long-term socioeconomic goals as determined by the ongoing plan process. They often relate to specific schemes and projects. Furthermore, they are usually routed through Central Ministries to State Governments for achieving certain desired objectives. These funds are generally in addition to the assignment of Central taxes as determined by the Finance Commissions. In some cases, State Governments also contribute their own funds to the schemes.
The Government aims to reward those transacting through digital mediums like debit/credit cards, mobile wallets and such other modes. Service Tax on payments for transactions up to Rs 2,000 through debit/credit cards has been removed. 0.75% discount has been announced for digital payments at petrol stations. With a vision to move towards a cashless economy, the Government may announce further measures to encourage digital payments.
Most unfortunately, Kerala MP E Mahmad fell down when the President was delivering his Budget Session speech. He was hospitalised immediately, but he died early on Wednesday. As per the age-old tradition, the Parliament had to close in honour of the departed member. But Jaitley went ahead with the Budget presentation.
US President Donald Trump is on a dramatic ‘hire-fire’ spree. He sacked the Attorney General for she courageously expressed dissent to Trump’s restrictive immigration policy, particularly the harsh ‘Muslim Ban’. Indian techies, most of whom are called cyber coolies in the West, may have difficulty in keeping jobs. The super-talker President wants to create a big employment space for US citizens by forcing employers to raise immigrant workers’ salary twofold to stop inflow of cheap workers. Trump is a trump card himself when it comes to dealing with countries with ‘terror’ records. Strangely however, he has spared Pakistan and Afghanistan, perhaps believing there is too much stake involved, and it would be premature to discard them at this moment. He seems to be tilting towards India. Modi was the fifth state head he talked to after being inaugurated as President. That’s great news for Indians.
(The writer is a core member of Transparency International, Odisha)