By Sunil Garodia
First publised on 2020-02-01 21:51:57
Although the Union Budget presented by the Finance Minister Nirmala Sitharaman has certain good points, one feels that overall, she missed the opportunity to introduce game-changing reforms. The need of the hour was to shake the economy out of its slumber. But the finance minister has tried to make small noises which will not be enough to do so. It needed a huge shout out but perhaps she did not find her voice.
In fact, even when the finance minister was reading her speech, one got the impression that the government felt that it had already done enough for the economy by announcing several measures in the last couple of months including announcing the intention to invest in infrastructure projects to the tune of Rs 1.5 lakh crore and reduction in the corporate tax rate. The budget has no major new policy to add. It has managed to alienate both the farmers and the corporate world by not addressing the concerns of either sector. This is evident as at least one farmers' body, the All India Kisan Shangharsh Coordination Committee, has announced that it will start an agitation against the budget, calling it "pro-corporate" while no corporate honcho has said only kind words about it. Even the stock market has thumbed it down with the Sensex going down by 900 points.
The removal of the dividend distribution tax is excellent and does away with double-taxation while leaving money in the hands of companies. So is increasing the limit of FPI investment in corporate bonds from 9 to 15%. This will mean a higher inflow of funds to companies through this route and will ease the pressure on banks. But the juggling of personal income tax by providing an alternate regime where people will pay lower taxes if they forgo exemptions is confusing. Instead of simplifying matters, taxpayers will now have to calculate their taxes both ways and adopt the one that is beneficial to them. Although to be fair to the government, the finance minister also announced that all exemptions will be phased out in the long run. Hence, this double regime can be seen as a preview of how taxpayers will file returns of income in the future.
One feels that given the slump in demand, the finance minister could have done much better by targeting specific areas and boosting demand by putting money there instead of giving small concessions to taxpayers and companies and hoping that the extra money in their hands will boost investment and demand. There was a need for structural reforms in many areas but they have been left for a later date. Just like the Economic Survey presented a day earlier, the budget too fails to provide the solutions to the many ills plaguing the economy. Of course, the economy will bounce back in due course. The budget could have hastened that by providing a direction. Sadly, it does not and now only the inherent strength of the economy and the huge Indian market will have to do the trick.