The maiden budget presented in Parliament on Thursday by Finance Minister Arun Jaitley turned out to be facile as he had a firm grasp on the nuts and bolts issues.
Even as his first budget contained several customary projects, programmes of the past and the ones he sets forth, its due emphasis on fiscal and growth impulse factors is refreshingly path-breaking to offer hope that the economy may turn around in the next couple of years.
As fiscal deficit is fraught with adverse repercussions particularly hitting the common man by raising the cost of living, Jaitley conceded at the outset of his Budget presentation that fiscal prudence is of paramount importance to him because of considerations of inter-generational equity.
A ballooning fiscal deficit stores up troubles for posterity as it hikes the debt burden beyond bearing not only for the extant generation by crowding out private investment with the government pre-empting and appropriating most of the borrowings for its own upkeep but also for the next generation which must perforce have to bear the interest burden.
Jaitley modestly claimed that the steps he unveiled in the Budget were only the beginning of a journey towards a sustained growth of 7-8 per cent or above within the next three-four years along with macro-economic stabilisation that includes lower levels of inflation, lesser fiscal deficit and a manageable current account deficit.
Rightly, Jaitley emphasised on the imperative that “we cannot leave behind a legacy of debt for our future generations. We cannot go on spending today which would be financed by taxation at future date”.
However, despite the compulsive need to generate more resources to fuel the economy, the budget has refrained from imposing penal taxes to extract every paisa from the hard-pressed people, trade and industry.
What Jaitley announced by way of tax incentives to ensure savings from the disposable income of all people through raising the marginal taxpayers threshold, enhancing limit on housing loan qualifying for tax relief and hiking the limit under Sec 80C from Rs 1 lakh to Rs 1.5 lakh and also to manufacturing sector by way of investment allowance and to foreign portfolio investors on dividends received by Indian companies from their foreign subsidiaries at concessional rate of 15 per cent without any sunset date and some positive tinkering in direct tax statutes would entail a massive revenue outgo of Rs 22,000 crore in a year.
No finance minister would dare to bare so broadly when the finances of the economy are in dire straits. Yet Jaitley has taken a calculated risk in generating feel-good factors by providing so many tax sops to people so that their incentive to save and stay invested for the economy would take deeper roots.
G. Srinivasan
