By
Randeep
Wadehra
Most of the criticism against P. Chidambaram’s
budget has come from the corporate sector (“boring”) and political opponents
(“unimaginative” “baazigari” etc). It is understandable that the corporate
sector is miffed. Instead of getting growth-oriented sops, it has been
“burdened” with 10% surcharge on taxable income above Rs 1 crore, and the hike
in surcharge on the dividend distribution tax.
The budget has been criticized on
other grounds too. The Finance Minister has brought down the fiscal deficit
marginally from 5.8% to 5.2% for the FY 2012-13 and has envisaged further
reduction to 4.8% in FY 2013-14, but there is no clear and concrete approach
delineated for the purpose. However, some definite measures are being taken for
reducing the deficit. Subsidies are being gradually withdrawn, or at least
reduced; there is even talk of increasing kerosene prices. Moreover, apart from
encouraging savings in the household sector the FM proposes to ensure that
these savings flow into various financial instruments. Some of the steps taken
towards this end comprise liberalizing the Rajiv Gandhi Equity Savings Scheme
(by raising the income limit for first-time investors from Rs 10 lakh to Rs 12
lakh), introduction of inflation-linked instruments, as well as additional
deduction of interest up to Rs 1 lakh for a person taking the first home loan
of up to Rs 25 lakh.
Some point out that the envisaged
increase in the GDP growth to above 6% doesn’t have a definite roadmap. Capital
expenditures are budgeted to increase by 27% in 2013-14, but the GDP growth and
reduction in fiscal deficit are being premised upon such imponderables as sharp
growth in revenues (21%), and escalating of capital receipts, which include
earnings from disinvestment and spectrum sales, from Rs. 24,000 crore this year
to more than Rs 55, 000 crore in 2013-14, as well as a healthy revival on the
industrial production and export fronts. However, such revival will depend upon
the policies formulated and implemented for the purpose. Admittedly, there is a
need for improving the investment climate, which makes it imperative that the
pending bills relating to Direct Taxes Code, Goods and Services Tax, and
Pensions and Insurance are legislated without any further delay.
The budget proposes
infrastructure debt funding through such instruments as the Rs. 50,000 crore 8%
tax-free infrastructure bonds. Moreover, small and medium sized companies shall
have the benefit of 15% investment allowance if they invest over 100 crore in
the coming two financial years (2013-14 and 2014-15). However, for any economy
to grow, its infrastructure becomes a vital enabling factor. Sadly, we have
been behind schedule on every aspect of infrastructure building like roads,
railways, power generation etc. We have seen how East Asian economies have been
assiduously building and regularly upgrading their infrastructures to keep up
with the best in the west. In India, we are still floundering in our search for
viable systems and procedures, not to mention laws, for building, maintaining
and managing various types of infrastructure. We have seen how every major
investment or acquisition effort – be it related to defense, transportation or
communications – invariably triggers off scam related controversies. In the bargain,
investments are held back and much time, energy and money are wasted on
cleaning up the mess. The red tape, in conjunction with cussedness and
confusion, is another major stumbling block in treading the road to unhindered
development. The environment clearance is a good example in this regard. Thanks
to inconsistent and confusing approach to giving environment clearance, mining
activity in the country has suffered a great deal. For instance, the ban on
mining in some states has led to more than 60% fall in iron-ore exports to
China, thus worsening the fiscal situation and trade imbalance.
The Rs. 66,000 crore allocation
to the HRD Ministry is a welcome step. There has been a lamentable gap between
the demand for quality managerial and skilled workforce by the corporate sector
and its actual supply. Obviously, the education sector needs to be ramped up.
This allocation, which, hopefully, is a beginning of something more substantial
and enduring, can help augment quality workforce if the entire education sector
is overhauled right from kindergarten/nursery stage to post-graduation and
doctorate stages.
The budget recognizes the need
for improving the quality of life in the hinterland. Hence, the allocation of Rs
80,000 crore for rural development. The budget has ignored all criticism of
MGNREGS and retained the level of allocations to this scheme, which has – despite
various reports of leakages and misuse – apparently been able to generate jobs
for the rural poor; if there has not been a hike in allocations there has not
been any cut either. Besides, the Direct Benefit Transfer (DBT), which
envisages transfer of cash benefits directly into the bank accounts of the poor,
has been taken to the next level by focusing on women and children. There have
been increased allocations for various DBT related schemes. For instance, a sum
of Rs 10,000 crore is allocated for food subsidy under the proposed Food
Security Bill (that is expected to become a law soon); likewise allocations to
Indira Gandhi Matritva Sahyog Yojana (IGMSY), which benefits pregnant and
lactating women, have been substantially increased, and scholarship funds for
school and college going OBC students too have been enhanced. However, there is
need to strengthen not only delivery systems but also the relevant checks and
balances regime to ensure that these benefits reach the intended targets.
The symbiosis between budgetary
allocations and development is a presumption, which is predicated upon not just
drawing up of a roadmap but also the building of actual road. The roadmap shows
how the proposed targets can be achieved through appropriate processes and
procedures. The actual road building involves putting such systems and
structures in place as would facilitate the working of those processes and
procedures so that the symbiosis between allocations and development
fructifies. This becomes apparent when we take even a cursory look at some of
the recent budgets and their consequences. In the absence of proper “roads”,
various “roadmaps” remained ineffectual.
This budget has certainly done a
good job of laying the foundation for the economy’s turnaround in the coming
years. However, certain issues relating to implementation remain to be
addressed. This would need a systemic renaissance so that the deserving get
their due without let or hindrance – no running from pillar to post and no
greasing of palms.
Given political will, this is
doable.
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