Manish Tiwari, the Congress MP from Punjab, nicely and succinctly explained for the laypersons — vote on account budget in the run up to the general elections is only to keep the government solvent for three months or the first quarter. Of course, his other remark that fiscal deficit of Rs 18 lac crore (5.1% of GDP) means unfunded expenditure was also enlightening to lay folks but was actually a barb thrown at the present ruling dispensation little realising things were worse all these years. Be that as it may.
As expected, the budget speech was short taking just an hour with Part A (macro economy) taking the lion’s share with predictable chest-thumping including for the achievements of individuals including on chess front. Part B was practically non-existent except form tax benefits to the likes of startups facing sunset clause for incentives to them. That tax exemption limit is now Rs 7 lakh sans deductions wasn’t something new as it was announced in the last year’s full-fledged budget itself as is the norm both for advance planning including payment of advance tax and TDS.
The finance minister was correct in holding back her proposals which possibly she would or her successor would role out post general elections. However, some sort of roadmap would have gone well with the masses. Like planning to bring back wealth tax, gift tax and estate duty if only to playdown the accusation that the government is pro rich. After all, accent on GST and fuel tax hits the poor hard turning Robin Hood tax on its head — taxing the poor to help the rich. Hope this skew is corrected when the regular budget is presented. Indirect taxes are regressive and an aspiring economy for the 7 trillion size should set store more by direct taxes rather than by the low-hanging fruit indirect taxes. The taxpayer base might have more than doubled since 2014 but a large number of income tax returns filed are for claiming refunds! Presumptive tax is working but the government cannot continue to handle the hard-to-tax category with kid gloves. It must gun after them by prising open undeclared income by pouncing on visible signs of wealth like swanky cars and luxury houses.
Encouragement to R&D is welcome but the tweaked expansion for the abbreviation FDI (foreign direct investment) — first develop India is just a rhetoric. Make in India is fine but to exhort MNCs to manufacture for India is simply not on. MNCs have their own objectives---export from their manufacturing centers back home first before setting up shops abroad except when labor is cheap abroad as was the case with China. In addition to goading MNCs to set shop in India, we must trust our own entrepreneurs to do so by clearing all decks for mobilising funds from abroad. Global depository receipts (GDR) have almost become extinct. It enables Indian companies with good track record to float their shares in foreign bourses after issuing shares in hard currencies to foreigners — non-residents, to be more accurate.
High-pitched assessment is the norm so as to worm into the hearts of the government of the day. The finance minister did well to remove this irritant albeit insubstantially when she announced in the interim budget that all notices for additional tax payment upto Rs 25,000 served upto 2009 and upto Rs 10,000 till 2014 would be withdrawn. Wise move indeed as such penny-wise pound-foolish approach only clutters the dockets of tribunals and courts. But more needs to be done to stop this pernicious tendency to by the hook or the crook inflate the assessed income to harass the taxpayers and win plaudits of bosses.
S Murlidharan is a freelance columnist and writes on economics, business, legal and taxation issues
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