Ease of living and ease of doing business have come together
By populist, one usually means profligate. This budget is anything but that
Amyopic and short-term view of the Union budget looks at it from the point of view of ‘what’s in it for me?’ By that, one usually means taxation. Indeed, tax rates are increasingly becoming certain. Because of GST, one shouldn’t have expected changes in indirect tax rates. Those hoping for reduction in corporate tax rates should have also noted the certainty. It had already been reduced for selected companies based on threshold turnover (read MSME) and that threshold has now been substantially hiked (Rs 250 crores), covering 99% of the companies that file returns. Salaried taxpayers, among others, complain about high compliance costs. If there is a standard deduction without furnishing transport and medical bills, isn’t that desirable? If there is e-assessment, isn’t that desirable too? What’s special about long-term capital gains in the equity market? One lakh is a high enough figure, and shouldn’t treatment of long-term capital gains be identical across all asset classes?
A word on fiscal consolidation. Yes, the fiscal deficit/GDP ratio was meant to be 3.2% in 2017-18. But it is important to note that the Union government’s GST revenue was for 11 months, and also that the shortfall in non-tax revenue through disinvestment targets was exceeded. More importantly, in 2018-19, fiscal deficit/GDP is projected at 3.3% and the target of reducing the Union government’s debt/GDP to 40% has also been accepted. A disinvestment target of Rs 80,000 crores is on the lower side, implying that 3.3% is achievable, especially if nominal growth picks up.
The non-myopic, medium-term view is to consider what the Union government can do to trigger structural change. First, there is the ‘ease of living’ strand, interpreted as what’s intended for individual households. What they need is empowerment through inputs. Hence, Ujjwala (LPG connections), Saubhagya (electricity), Jan Aushadhi centres (medicines), toilets, housing (PM Awas Yojana), Health Protection Scheme, and life insurance. These are like individual private goods. Some are merit goods, as they warrant subsidisation. But there is also a strand of collective private goods. Thus, especially in view of the government’s responsibility under the Seventh Schedule, we see a strengthening of e-NAM, upgradation of rural haats, agricultural marketing infrastructure, widening of the Gram Sadak Yojana, Bharatnet, Smart Cities, AMRUT, National Highways, Bharatmala, UDAN, railways and railway stations.
The other strand is ‘ease of doing business’. By this, one doesn’t necessarily mean the corporate sector. Indeed, for non-corporates the two hats of individual/household and enterprise often blur. Under this are the MSP system, horticulture clusters, broadening Kisan Credit Cards, credit for lessee cultivators, tax treatment of Farmer Producer Companies, initiatives under education , skill centres, MUDRA, government contribution for EPF, fixed-term employment and National Logistics Portal. Why should people always seek out jobs and employers? They should become entrepreneurs and employers and provide jobs to others. That is what Startup India and Stand-up India mean. There is no rural/ urban or agriculture/non-agriculture differentiation in this intent. Rural and agriculture were always implicitly part of it.
Election year, last budget of the government, populist — these are meaningless labels. This budget doesn’t mark any discontinuity with the policies followed since 2014. By ’populist’, one presumably means profligate. This budget is anything but that. According to the dictionary, ‘populist’ is something that represents the interests of ordinary people. This budget is certainly that, which is why it won’t be popular with those rooting for substantial tax cuts.