Good to See No Obvious Freebies, Deficit at 3.2% is Actually Not Bad
Black money will recommence its journey, this time in dollars and valuables; efficiency, not govt diktat, should boost digital transactions
gressively into simplifying the tax regime, laws and rules, as that is the only long term solution to black money.
On the conservative and careful element, this Budget scores quite well, and keeping the budget deficit at 3.2% of the GDP rather than 3% envisaged initially, is actually not bad. It gives the government some flexibility to spend a bit more, but not too much. It also enables greater allocations on defence and infrastructure that are critical.
On UP, the freebies are not so attractive or explicit as were expected, and again it is nice to have a Budget that is not grossly targeted at a state.
As an aside, the reliance on Nabard for most farmer- related proposals rather than departmental machinery is quite intriguing — the PM, it appears, wants to directly implement various agriculture proposals rather than go through state governments.
Finally on simplification of taxation rules and laws, the Budget proposals are not so clear and, apart from a few, quite harmful. They take us back a year or two at least. But given that black money is an outcome of poor laws and their implementation, this component achieves special importance.
A strange notion is doing the rounds in this government that cash is universally bad. Senior bureaucrats have also been heard claiming that digital transactions are cheaper than cash transactions, and how black money can be better monitored by having them.
In reality however, for lowvalue transactions digital is currently much more expensive than cash. Forcing digital on India will harm us all, make for a higher cost economy, and harm the government politically. Many in the informal sector have reverted to cash, the 3-5% transaction fees of digital payments was too much for them. Digital payments through banking channels are admittedly cheaper for the merchant, but then the bank bears those costs. Let digital grow, but due to its efficiency and not because of government diktat or artificial incentives. Proposals such as reduction in deductible cash transactions to 10,000 therefore cannot be welcomed. No doubt there are some proposals in the right direction, reduction of holding period for long-term capital gains, is one example. But there are few such ones. Mostly the direct tax code would become longer and more complex after this Budget. This means black money will recommence its journey in India, except this time it will not be in desi cash, but in valuables and even US dollars. But thankfully, our macro conditions should be fine.
Forcing digital on India will harm us all ...Let digital grow, but due to its efficiency and not because of government diktat or artificial incentives