I/III. UNION BUDGET 2016-17 Arun Kumar Pretending to be pro-poor, little change over UPA
While giving concessions worth Rs1,000 crore in the direct taxes paid by the rich, the government plans to net an extra Rs 19,000 crore in indirect taxes, which are contributed by all. This reveals a regressive intent. Finance Minister Arun Jaitley with his budget team outside North Block before meeting the President in New Delhi on Monday. PTI [The government has given direct tax concessions and will forego almost Rs 1,000 crore in direct taxes while hoping to collect Rs 19,000 crore additional from indirect taxes. This reveals the real intent of the government. Direct taxes are paid by the well-off (only 4 per cent of Indians pay direct taxes, and these are the well-off) while indirect taxes are paid by everyone and tend to cascade into increased prices via consumption for the poor. Thus, a decline in the share of direct taxes is an indication of a regressive scheme of things.] Like all Union budgets, this one also is long on promises but hides the real dynamics, namely, how the resources are to be raised for the promised very substantial expenditures. The budget is targeting more than Rs 19 lakh crore of expenditures. This is enough to give small amounts to almost every section of Indian society. Based on this increase the Finance Minister has claimed a budget that is pro-farmer and pro other marginalised sections of society. But, what is also clear is that these schemes often do not require budgetary allocations and can be financed through bank loans. Also some are mere policy announcements with little budgetary implications. In this respect, the budget indicates that the government is more or less continuing with the policies of the UPA regime. That is what it had done last year as well. The one important lesson that the NDA government learnt last year was that its political losses were due to its image of being anti-poor and pro-business – Rahul Gandhi’s ‘suit boot ki sarkar’. The budget attempts to correct that image. The UPA had also tried the same in its last few budgets. No wonder, the government has made many pro-poor announcements. Arun Jaitley likes the number 9, since he has listed nine points of ‘transformative agenda’ and as many of ‘tax reform’. ***The government has given direct tax concessions and will forego almost Rs 1,000 crore in direct taxes while hoping to collect Rs 19,000 crore additional from indirect taxes. This reveals the real intent of the government. Direct taxes are paid by the well-off (only 4 per cent of Indians pay direct taxes, and these are the well-off) while indirect taxes are paid by everyone and tend to cascade into increased prices via consumption for the poor. Thus, a decline in the share of direct taxes is an indication of a regressive scheme of things.*** [Emphasis added.] The Economic Survey had indicated that India has one of the lowest tax/GDP and direct tax/GDP ratios. The Survey hinted that taxes on the rich may be raised and their subsidies cut. However, apart from some tinkering, the overall reduction in direct taxes indicates that the rich are not likely to bear any major increase in taxation. This author has been proposing since the late 1980s an increase in wealth taxation and estate duty to reduce inequities but this is nowhere in sight. Mr. Picketty has also argued for these measures and the Economic Survey raised expectations that these policies may be finally introduced. The black money schemes if effectively implemented could have increased direct taxes’ collection substantially. However, the NDA government has not been successful in tackling the black economy in spite of the various schemes it has introduced since it came to power. For instance, little has been declared out of the hoards of black wealth held abroad. The gold monetisation scheme has also not been successful. The new schemes in this budget which give concessions from penalties and prosecution amount to an amnesty to those who have not declared their incomes in the past. However, the government cannot call it that since it gave an undertaking to the Supreme Court in 1997 that in the future it will not introduce any voluntary disclosure schemes. These schemes cannot succeed unless the government is willing to be tough but that would send an anti-business signal and the NDA regime does not wish to do that. The Finance Minister announced proudly that in 2015-16 the Plan expenditures have not been cut to attain the fiscal deficit target and he is correct in this. In the preceding five years there have been massive cuts in this. This year’s good performance has been possible because the tax collections have been on target. This is due to the decline in the petroleum goods prices and the non-passing of that decrease to the public by raising excise duties. Excise duty collection has gone up by approximately Rs 50,000 crore over the budget estimates. This has compensated for the decrease in direct taxes by around Rs 50,000 crore. Non-tax revenue has gone up by Rs 37,000 crore over the budget estimates with the net result that the total revenue collection has gone up. States’ share has gone down by about Rs 17,000 crore, thus leading to an increase in the Centre’s share of revenue. The implication is that the revenue buoyancy of direct taxes has been less than that assumed last year. What it also suggests is that the economy is not growing at around 7 per cent, as assumed in the budget. This is also apparent from the repeated attempts of the Ministry of Finance to improve demand in the economy. Businesses are also repeatedly asking for interest rate cuts to boost demand. Assuming a 7 per cent rate of growth for the coming year may also lead to miscalculations. This year’s budget has been drafted in an uncertain environment emanating from both the internal and external situations. The Finance Minister has flagged this. The implication is that there is need to be cautious rather than ambitious. The external sector can short-circuit the growth of the Indian economy and make the budgetary calculations go wrong. Unless the correct figures are used for growth and the rate of inflation, errors can get multiplied in case of any exogenous shock. Finally, the Union Budget is first an instrument of macro-economic policy and then of micro-economic policies. If the calculus of the former is incorrect then the latter are likely to fail. Given the international situation of declining commodity prices and likely shortfall in growth, the package for farmers and for the marginalised sections — the highlight of the budget — is likely to also yield partial results. The writer is retired Professor, JNU. II/III. http://www.business-standard.com/article/opinion/budget-2016-shows-modi-is-a-reformer-in-retreat-116022900832_1.html Shekhar Gupta: Budget 2016 shows Modi is a reformer in retreat The loss in Bihar has forced a change in NDA's market positioning Shekhar Gupta | New Delhi February 29, 2016 Last Updated at 23:39 IST [The tone of the speech and the detail also show a reformer in retreat. The loss in Bihar has forced a change in the National Democratic Aliance’s market positioning. Until last year, the prime minister was saying that the Mahatma Gandhi National Rural Employment Guarantee scheme was an acknowledgement of the state’s failure to create productive jobs and, therefore, a shame. He was right to say so and this promised a more reformist, entrepreneurial and non-povertarian outlook. This Budget speech, on the contrary, boasts of the highest-ever allocation to it.] The Narendra Modi government’s third Budget confirms that he is a reformer of government and not a liberaliser of economy. The most significant positive aspects of this Budget, for example, all lie in improving government processes. The most important of these are tax administration, reduction in taxman’s discretionary powers and reduction of both the extent and the duration of tax litigation. There is more money for physical infrastructure, but it will still go through a government pipeline. Reform of government processes includes a whole-hearted embracing of Aadhaar, direct benefit transfer of more subsidies, including, bravely, on fertilisers and some moves on non-merit subsidies and giveaways. A significant reduction in full tax exemption on provident fund withdrawals is a reform that needed serious courage to undertake, although we are not sure yet if it will survive Parliament. Modi’s isn’t a “minimum government, maximum governance” approach. It is more government, but better governance. There is no real relaxation for foreign direct investment in newer sectors or an increase in ceilings, except in agro-processing. For all the rest, you come to us and we, the sarkar, know best. On genuine privatisation, there isn’t even a trial balloon. There is talk of strategic sale, but that is confined to public sector undertakings (PSUs) selling their physical assets such as land. In the government system, this is easier said than done, since asset sales are messy and scam-prone. But again, Modi thinks he can reform his government sufficiently for it to have the credibility to do this. The change in the name of the disinvestment ministry to investment ministry is more than cosmetic. It fully sets the clock back on the Vajpayee-Shourie idea and pleases the Rashtriya Swayamsevak Sangh (RSS)/swadeshi ideologues. Read our full coverage on Union Budget 2016 ***The tone of the speech and the detail also show a reformer in retreat. The loss in Bihar has forced a change in the National Democratic Aliance’s market positioning. Until last year, the prime minister was saying that the Mahatma Gandhi National Rural Employment Guarantee scheme was an acknowledgement of the state’s failure to create productive jobs and, therefore, a shame. He was right to say so and this promised a more reformist, entrepreneurial and non-povertarian outlook. This Budget speech, on the contrary, boasts of the highest-ever allocation to it.*** [Emphasis added.] The Budget is also the most important annual statement of a government’s intent on political economy. In those terms, it is a statement of a hard swing to old Congress-style agro-povertarianism. Parts of the Budget speech, particularly in the first half, could have come in a Budget speech from late Chaudhary Charan Singh. This is a political acknowledgement of rural distress and decline in wages. This has panicked the government into making what sounds like an impossible promise of doubling farmers’ incomes by 2022. Growth like that is unheard of in farming, particularly as the talk, even in this Budget, is more of organic farming than of new technologies, particularly in seeds. Farmers’ incomes cannot start growing at 15 per cent annually compounded in any case, and definitely not if your policies obsess over the fetishes of the RSS than embrace modern science. But that reckoning is still six years away. A change in emphasis now is probably a good political palliative - or the only plausible one. The three areas of widely acknowledged good news — highways, power and railways — are the Modi government’s chosen engines of growth and investment. Each is led by a hard-working, modern, performance-oriented minister. The lesson, therefore, is simple. Even if you want to only improve the government and not minimise its role, you can need top-quality ministers. That this council has so few of them is a big cause for concern. The most important lesson of 21 months in power is that India is more complex than Gujarat, which a brilliant chief minister could carry just on his own shoulders. India needs a larger team, and ministries like agriculture, rural development, health and, indeed, human resources development also need firing. Does Modi accept that? The Budget can't tell us. Wait for the Cabinet reshuffle, if there is one. The author is a journalist III. From: CPIML LIBERATION <[email protected]> A Budget of Betrayal Arun Jaitley doesn’t Address the Burning Issues Facing The Common People and The Indian Economy New Delhi, 29 February 2016. [The budget does not even mention the Food Security Act which is yet to be implemented in full.] The budget presented today by Finance Minister Arun Jaitley does not address the burning issues facing the common people and the Indian economy, while blaming “an unsupportive global environment, adverse weather conditions and an obstructive political atmosphere” for the growing economic hardship. ***The budget does not even mention the Food Security Act which is yet to be implemented in full*** [emphasis added]. The only reference to public distribution system is made in the form of proposed ‘automation’ of three lakh fair price shops. While promising an increased emphasis on irrigation, the government has done little to address the credit crunch and procurement crisis which lie at the heart of the deepening agrarian crisis that continues to drive thousands of Indian farmers to suicide in every month. The vague promise of setting up a funding agency for higher education with a meagre corpus of Rs 1,000 crore does in no way address, let alone answer, the crisis on the higher education front where students from middle class and poor backgrounds are being systematically priced out. There is no major initiative on the health sector either – the government seems to be only interested in leaving poor patients at the mercy of an increasingly expensive and ever expanding PPP mode. While as many as 75 lakh middle class households responded to the government’s appeal to give up LPG subsidy, the super rich continues to violate tax laws and default on repayment of bank loans. Yet, the government has extended no benefit to the middle class while continuing to pamper the rich with greater exemptions, tax amnesties and even incentives to violate the laws of the land. The regressive character of India’s taxation policy has been further reinforced in this year’s budget with the government going for added cess and surcharges on goods and services, leaving corporate tax rates unchanged and announcing only a minor increase of 3% surcharge on annual personal income of more than Rs one crore. The huge jump in the allocation of the road transportation sector from Rs 28679 crore in 2014-15 to Rs 69,422 in 2015-16 (revised estimate) to 1,03,386 crore in this year’s budget clearly shows the government is bearing a growing burden of road construction projects while the private players in PPP mode are walking away with all the benefits. Indian banking sector is reeling under the burden of huge corporate defaults and the Rs 25,000 crore allocated for recapitalisation of banks will hardly provide any cushion to the public sector banks. The announcement of lowering of government stake in IDBI from more than 80% at present to less than 51% clearly indicates that the government is only interested in using the banking sector crisis as a pretext for privatisation. CPI(ML) appeals to all to press the government to provide for immediate full implementation of the Food security Act, expansion of MNREGA, availability of greater quantities of easier and cheaper credit for farmers and for people engaged in various livelihood-related projects and small enterprises and increased allocation on health and education fronts. (Dipankar Bhattacharya) General Secretary, CPI(ML) -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send an email to [email protected]. Visit this group at https://groups.google.com/group/greenyouth. 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