(Ishwari Bajpai is Senior Advisor at NDTV; he has been a journalist for 30 years, and has covered the elections since 1984.)
After weeks of speculation and high expectation, the Budget was finally presented on Saturday. And then the heavens opened up and it poured and it poured as if the monsoon had returned.
How the two events are connected, we will never know, but perhaps we can ascribe some motive to the Gods. And depending on which side of the political-economic spectrum you belong, you can say they were tears of joy or sorrow.
And perhaps that sums up the budget best. It promised a lot and did little. While it offered innovative ideas and game-changing laws, it confined itself to limited changes, some as precursors for tomorrow.
The average taxpayer got little, even though the Government bandied about Rs 4.4 lakhs as the new non-taxable limit. It conveniently forgot to mention that that figure is only reached if interest payments on home loans are taken into account. If you don't have a home loan, then you only get an extra Rs 9600 a year for transport, Rs 10000 for medical and another Rs 50,000 if you want to make more pension savings. The increase in service tax to 14% and the increase in excise duties will eat away any saving the taxpayer is gaining.
Two new saving instruments offer some succor to those whose savings have been ravaged by inflation over the past few years. The re-introduction of tax-free infrastructure bonds should give, at the least, a rate that protects the capital invested and may be a small return above that. Gold bonds also promised in the budget, could also do that or more depending on how gold prices behave over the next few years.
For the poor the FM can claim credit for promising very cheap accident and life insurance and appropriating "dead money" from pf/epf accounts for a pension fund. The idea of a basic universal social security system is something that was really needed.
The abolishment of wealth tax and a 2% surcharge on income above Rs 1 crore does not affect most people, but you have to ask whether the higher tax for the rich will not just make them generate black money.
And black money was the big focus of the budget especially that which is parked abroad. This was a big BJP promise and we will soon have a very stringent law to get people to declare assets abroad and how they got them. While there should be severe punishment for taking money out of the country illegally, there are two worries: one, will those who implement it misuse the law as happened under the old FERA and, secondly, it does not address the root cause, which is that the black money is generated here before going abroad...how will we stop that?
The Finance Minister mentioned an innovative idea of encouraging people to use debit/ credit cards for purchases but first he needs to talk to his tax department that runs threatening advertisements saying " we know your credit spends... declare your full income" (or words to that effect). Hardly conducive to my buying a TV on my credit card.
Neither this nor limiting cash expenses or cash payments for property is going to stop black economy. Every day properties are transferred with large cash components, everyone knows this, including the banks that lend money for you to buy it. That excise avoidance (trucks that mysteriously exit factories without paying excise) account for the bulk of the black money; shopkeepers are only the last mile and as my grocer put it, if I receive 45% of my goods against cash I have to generate cash to pay.
Of course, it may be unfair to blame Mr Arun Jaitley for a malady that is much deeper in our psyche, and while chasing the trillions abroad is good publicity and warms the cudgels of every nationalist heart, there is a need for more to be done on the home front to curb black money. And until that is done, government finances will continue to be weak, and money for infrastructure scarce.
Besides announcing a lowering on IT tax on business the FM promised three other steps to improve the business environment. To be able to start a business based on selected norms without advance permission, an international standard bankruptcy law and a public contracts dispute law. The first two allowing for ease of entry and exit from business and the other reducing disputes and litigation on government contracts.
Unfortunately for Mr Jaitley, as for the FMs before him, it isn't easy to balance economics and politics. In a year the BJP hopes to capture Bihar and then West Bengal they could not pull the plug on subsidies however much the Economic Survey may say they are wasted. When victory margins could be close you can't afford to alienate any voter.
Which also explains the Rs 5000 cr increase for MREGA that the Prime Minister vilified the day before the budget.
And everyone seems to have understood this which is why criticism has been muted. Mr Jaitley has good intentions, has indicated the trajectory and has promised to bite the bullet bit by bit. The quantum leap he started the budget speech with is the guiding principle, but we may take small steps to get there.
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