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

News Snippets

  • Flipkart assures employees that there will be no job or salary cuts due to the COVID-19 pandemic
  • Although it was obvious, but the government still clarifies that there is no need to switch off appliances and only lights need to be switched off on April 5 at 9pm after confusion in the minds of some people
  • PM Modi and President Trump decide "to deploy full strength of (Indo-US) partnership" to fight against COVID-19
  • 17 states have reported 1023 cases of coronavirus linked to the Tablighi Jamaat, which translates to 30% of all positive cases in India
  • The government says people should not use alcohol-based hand sanitizers before lighting diyas or candles on April 5
  • The railways say there is no certainty yet when services will resume after the lockdown and a final decision will be taken in the next few days
  • As coronavirus cases multiply in Assam, six north-east states seal their borders with the state
  • Power System Operation Corporation Ltd. (POCOSO) putting all systems and protocols in place at war-footing to ensure there is no grid failure due to reduction in demand on April 5 at 9 pm
  • Power ministry scotches rumours that the power grid might fail due to the 9-minute blackout called by PM Modi on Sunday, April 5
  • Centre asks people to wear home-made masks if it is absolutely essential for them to step out of homes
  • Centre asks states to allow licensed street vendors to sell essential items
  • 8000 samples were tested across India on April 2, but the government said that testing will be need-based and will not be used as a confidence-boosting measure
  • Air India operating special flights to fly passengers stuck in India since the lockdown
  • For the first time in history, Darjeeling loses first flush tea due to suspension of garden work for Covid-19 outbreak
  • Supreme Court asks journalists to be responsible and publish only the official version of news after it was brought to its notice that migrant exodus started after the 'fake' news that the lockdown will be extended to three months
Total count stands ar 3082 as India records 16 Covid-19 deaths, the highest in a single day
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. Writes for a number of publications.
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.