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LATEST NEWS UPDATES | Budget in search of hope -Ashok Sekhar Ganguly

Budget in search of hope -Ashok Sekhar Ganguly

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published Published on Apr 2, 2015   modified Modified on Apr 2, 2015
-The Telegraph

The 2015-16 budget was presented to the Lok Sabha by the finance minister on February 28, 2015. The first half of the 2015 budget session of both Houses of Parliament has just ended. The highlight was the passing of a number of bills and the budget debate. The debate on the budget in the Rajya Sabha was a long one, lasting over 10 hours. Several speakers participated, drawn from all sections of the House. As would be expected, many of the observations and important questions raised by members covered common topics. The finance minister's reply was reasonably comprehensive but he did not respond to all the issues raised by members during the debate. All the speeches by members are on record in the proceedings of the House. However, the 2015-16 budget delivered some important pronouncements which need wider public airing.

The annual budget document is a fairly complex document which, although widely reported and commented upon by 'experts' and in the media, is generally beyond the grasp of the majority amongst those who are affected by it.

The three important components of the 2015-16 budget are The Economic Survey, the recommendations of the 14th Finance Commission and the finance bill itself.

This year's report in the Economic Survey, especially the first of the two-volume document, is quite remarkable for the clarity of its communication and messages, even for a lay reader. It is optimistic in tone and conveys a sense of confidence in India's growth story. In delivering this message, the report glosses over possible pitfalls regarding the consequences of unanticipated adverse events. Furthermore, India's preoccupation with constant comparisons with China has become tiresome and irrelevant. Such comparisons are not only out of context with ground realities but have become a tired and arcane subject. Nevertheless, the report needs greater airing in the public domain.

The report of the 14th Finance Commission represents significant shifts in the sharing of revenue between the states and the Central government, reflecting the evolution of India's federal structure. It has been described as a landmark in advancing cooperative federalism. The shift in revenue sharing has coincided with the dismantling of the Planning Commission as an instrument of planned investments and dispersal of earmarked resources by the Centre to different states, and the creation of the Niti Aayog in its place. The functions of the Niti Aayog, however, have yet to be clearly defined. The shift is expected to acknowledge a larger role of the National Development Council, increase the share of allocation of revenues to the states and, eventually, phase out the Centrally sponsored schemes.

The build-up towards the presentation of the 2015-16 budget raised expectations that it would be bold, dramatic and path-breaking. It turned out to be, at best, what may be described as the 'new normal' in the modern sense of the term.

Some of the key issues raised by members of the Rajya Sabha, and which were not referred to, in the finance minister's reply, are worth raising in the public domain.

For example, the 'housewives' dilemma' or the bewildering rise in prices of goods and services of daily consumption. The challenge to reconcile this dilemma with the reported drop in the rate of inflation needs to be addressed for the homemakers' comprehension.

Another bothersome issue is regarding fallback options - what if unanticipated, but not unusual, events were to occur? For example, if in place of the windfall gains from the drop in global crude oil prices, these prices were to gradually or even suddenly rise again. Then there is the recent example of massive losses of standing crops owing to unseasonal rains across north India, and the forecast of lower than average rainfall during the next monsoon. How will these affect the household costs?

While some draconian measures are proposed to deter those with unaccounted for funds or black money abroad, there was no response to the repeated questions raised by several speakers about domestic black money. This is a critical issue, since the domestic black economy is purported to be significant and growing. Sadly, there were no answers as to whether black money squirrelled away abroad, or generated domestically, will be dealt with with equal vigour and sense of urgency.

Similarly, questions regarding the spreading of the domestic tax net more widely and raising the productivity of direct tax collection remained unanswered.

The goods and services tax bill has yet to be introduced. However, there are serious apprehensions regarding the final shape of the proposed GST bill. Apparently, during long drawn out consultations with the states, the original objectives have gradually been compromised in the name of cooperative federalism. The eventual outcome of the GST may turn out to be an administrative nightmare of accommodation with the states and their so called 'special needs'. There is a growing apprehension that when the GST finally becomes a reality, the prices of goods of daily consumption will rise. The logic of keeping out petroleum products, liquor, real estate and the cascading 1 per cent 'every step' tax on goods needs far greater clarity than is apparent at present..

The finance minister has done a commendable job to try and contain the current account deficit. However, in achieving this goal and taking into account the recommendations of the 14th Finance Commission, there is widespread apprehension that key welfare schemes, such as farm subsidies, minimum support price for farmers and other major programmes meant for the upliftment of the poorer sections of our country are likely to face significant cuts and severe setbacks.

Just to cite a few examples to underscore this apprehension: the allocation of 1 per cent of the gross domestic product to health has remained the same for the past 10 years. What suffers greatly is the care of postnatal mothers and newborn children. The allocation to anganwadis is being cut from 18,000 crore to 9,000 crore. This cut will deeply and permanently damage an institution of proven track record and enormous social impact. The allocation for the nationwide midday meal scheme for children, has been reduced from 13,000 crores to 7,000 crore and the allocation to panchayats has been literally cut to the bone. The list is virtually endless, since allocations in several other vital areas affecting women, children, and especially the ' gareeb' and 'ati gareeb' sections are also being drastically reduced..

Collectively, such budgetary aggression, especially providing relief for the vulnerable sections of society will lead to severe and unintended social consequences for cooperative federalism.

Answers are also awaited regarding the proposed changes in the role of India's most respected and premier national institution, the Reserve Bank of India. Any proposed change needs wider public airing and debate. Changes in this national institution, with its proven track record, must be pursued with logic and caution.

The RBI is an all-weather watchdog of the Indian financial sector. The need to repair what is not broken is not at all clear, as yet.

We can only request the finance minister, to use the budget as a sentinel of hope rather than an instrument of dashing hopes. Managing deficit is very important but assisting the poor and the downtrodden must remain the highest national compulsion. The well proven programmes to assist 600 million poor Indians must not become the victim of mindless fiscal target chasing. Otherwise, history will judge India's budget for 2015-2016 as 'of the well-to-do', 'by the well-to-do' and 'for the well-to-do'.

The Telegraph, 2 April, 2015, http://www.telegraphindia.com/1150402/jsp/opinion/story_12048.jsp#.VRyzMOFr9U8


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