more continuity than change - the hindu
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More Continuity Than Change - The HinduTRANSCRIPT
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OpinionEditorial
Morecontinuitythanchange
Overtheyears,theIndianbudgethasceasedtobeamerestatementofaccountsandhasalsolaiddownthebroadcontoursofeconomicpoliciestobefollowed.TheNDAgovernmentassumedofficelessthantwomonthsbeforethepresentationofthebudgetwithapromisetooverhaultheeconomy.Nodoubt,theexpectationsfromtheFinanceMinisterhavebeenunrealisticallyhigh.Notjustthestockmarketsbutpracticallyeveryonehadbeenexpectinghimtodeliverontheelectionpromisesofaparadigmshifttoboosttheeconomy.ArunJaitleyhasdonewelltoemphasisethatthemeasuresannouncedinthebudgetareonlythebeginningofajourneytowardsasustainedgrowthof78percentorabovewithinthenext34yearsalongwithmacroeconomicstabilisationthatincludeslowerlevelsofinflation,lesserfiscaldeficitandamanageablecurrentaccountdeficit.Thosewords,alongwithsomerobustbutrealisticbudgettargetsandawiderangeofallocationstodiversesectors,helpedstabilisethemarketsandearnedtheFinanceMinisterappreciationforhismaideneffort.Amongthenoteworthymeasuresarethemovetowardsafriendlierandmorestabletaxregime,encouragementtoFDIincriticalsectors,thefocusoninfrastructureincludingpowerandroads,andtheemphasisonremovingobstaclestomining.
ThechallengebeforetheNDAgovernmentwastopersistwithfiscalconsolidationwhilesimultaneouslycreatingmorespacefordesperatelyneededpublicinvestment.TheUPAgovernmentsinterimbudgethadsetanoverlyambitiousfiscaldeficittargetof4.1percentforthecurrentyear.WhileacknowledgingthatitwouldbeadauntingtaskinthebackdropoftwoyearsoflowGDPgrowthandthesubsidyburdenamongotherfactors,thegovernmenthasretainedthetarget.Thefiscaldeficittargetsfortheimmediatefutureareevenmorechallenging,at3.6percentand3percentfor201516and201617respectively.Therevenuedeficitisslatedtocomedowntobelow3percent.Fiscalconsolidationovertherecentpasthasbeenachievedbyreductioninexpenditureratherthanbyrevenueaccretion.Eventhoughtheeconomyisyettocomeoutofthesub5percentgrowthtrajectory,thebudgethastargetedanambitious17percentgrowthinnettaxrevenuesfromtherevisedestimateofRs.8,36,026crorein201314toRs.9,77,258crorebytheyearend.PlanexpenditureisbudgetedatRs.5,75,000crore,anincreaseof26.9percentover201314.NonPlanexpenditurewithadditionalprovisionforfertilizersubsidyisslatedtogouptooverRs.12,19,892crore,upfromRs.12,07,900croreintheinterimbudget.Asexpected,thebudgetisdependingheavilyonpublicsectordisinvestmenttonarrowthedeficit.ThetargetofoverRs.58,000crorecanbeachievedonlyifthepresenthighvaluationsinthestockmarketscontinuefortheremainderofthisyear.RecentSEBIrulesmandatinghigherpublicshareholdingforpublicsectorundertakingswillnodoubthelpthegovernment.Expenditurecontrolwillremainapriorityarea.AnExpenditureManagementCommissiontolookintovariousaspectsofexpenditurereformshasbeenpromised.Itsinterimreport,tobesubmittedwithinayear,willbekeenlywatched.
Muchwasexpectedfromthebudgetinrationalisingsubsidies.TheFinanceMinisterhaspromisedanoverhauloftheentiresubsidyregimeincludingfoodandfertilizersubsidiesatafuturedate.Thebudgethasonlymademinoradjustmentsinpersonalincometax,raisingthetaxexemptionlimitbyRs.50,000,fromRs.2lakhtoRs.2.5lakhinthecaseofindividualsbelow60yearsofage,withcorrespondingincreasesforseniorcitizens.TheinvestmentlimitunderSection80CoftheIncomeTaxActhasbeenraisedtoRs.1.5lakhfromRs.1lakh.Thedeductionlimitonloaninrespectofselfoccupiedhousingpropertyhasbeenraised.Amoreconducivetaxregimehasbeenpromisedforinfrastructureinvestmenttrustsandrealestateinvestmenttrusts.Therehavebeennosignificantchangesinindirecttaxeseither.Thesintaxoncigarettes,cigarsandothertobaccoproductshasbeenincreased.Theservicetaxnetisbeingwidened.Morethanthechangesintherates,itistheemphasisonafriendliertaxregimethatisbothfairandcertainthatisnoteworthy.Thebudgetannouncementonavoidingretrospectivetaxationisnotascategoricalasmanyindustrybodiesandtaxconsultantswouldhaveexpected.Thegovernment,whileretainingtheretrospectivechangesmadein2012,hasdecidedtogetspecificcasesunderthechangesscrutinisedbeforeproceedingonthem.Theeffortistomovetowardsamorestableandpredictabletaxationregime.Asimilarsentimentisbehindthedecisiontoenlargethescopeofadvancerulingandgenerallytoneuptaxadministration.TheabsenceofamoredefinitiveroadmapforGoodsandServicesTaxisunderstandable,buttheFinanceMinisterscommitmenttopursuingitistobewelcomed.
Foreigndirectinvestmentisbeingencouragedinawiderangeofsectorsincludingdefence,insuranceandrealestateandinthedevelopmentofsmartcities.TheMGNREGA,aflagshipprogrammeofthepreviousgovernment,willberetainedbutorientedtoworksthataremoreproductive,assetcreatingandsubstantiallylinkedtoagriculture.Publicprivatepartnershipsininfrastructurewillreceiveaboost.AnewinstitutionwithacorpusofRs.500crorewillhelpmainstreamPPPs.Freeinginfrastructurelendingfromtheconstraintsofreserverequirementsshouldbringadditionalresourcesintotheinfrastructuresector.WhilemanymoresectorsaresettoreceiveincreasedPlanallocations,theoverallmessageofBudget201415isoneofcontinuity.Therehasbeennodirectionalchange,obviouslyonthereadingthatnonewaswarranted.
Keywords:Unionbudget2014,ArunJaitley,NDAgovernment,foreigndirectinvestment,ExpenditureManagementCommission,subsidymanagement
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