Santosh Kumar Mohapatra
he array of incentives and schemes, including doles for the middle class, unorganised workers and labourers, which interim Finance Minister Piyush Goyal has declared in the interim budget, are deceptive.
The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme under which Rs 6,000 is to be transferred into bank accounts of farmers holding up to 2 hectares in three equal instalments is no way close to KALIA scheme of Odisha, which aims to benefit 12 crore farmers.
There are no land records to determine beneficiaries of PM-KISAN whose holdings have to be under 2 hectares. The scheme will bypass not benefit landless farmers and sharecroppers. A pittance of Rs 17 a day will in no way provide relief to distressed farm sector. It can neither mitigate the adverse impact of neo-liberalism on the agricultural sector nor act as replacement of MSP. But farming has to be made profitable and landless labourers should get land.
The interim budget has been dubbed as a bonanza for salaried people as the limit of tax exemption has been enhanced from Rs 2.5 lakh to Rs 5 lakh and standard deduction has been raised by Rs 10,000. The last time basic income tax exemption limit was raised was in the first budget of NDA-II budget when finance minister Arun Jaitley raised it from Rs 2 lakh to Rs 2.5 lakh. Every year he would have raised the limit in view of nominal rise in income and inflation. After five years it would have been Rs5,00,000. But there lies the trickery and deception as the said benefits will not be available for those with net taxable income (that is, income after availing deductions under sections 80 C to 80U) over Rs 5 lakh.
Pradhan Mantri Shram-Yogi Maandhan promises pension of just Rs 3,000 a month to workers in the unorganised sector (with monthly income up to Rs 15,000) from the age of 60 in return for monthly nominal contribution (Rs 100 every month if age is 29 years, Rs 55 if age is 18 years). This is sheer fraud as one has to pay for long years to get meagre returns. If inflation is considered, the real value of Rs 3,000 may come down to Rs 500 after 10 years. It is also difficult to decide whose income is under Rs 15,000.
The Modi government wants states to adopt fiscal discipline but has itself embraced fiscal profligacy for electoral gains. India’s government debt (centre plus state) has touched about 70 per cent of the GDP as against future target of 60 per cent. Since long, it is planned to contain fiscal deficit at 3 per cent of GDP. The government had revised the fiscal deficit for 2017-18 at 3.5 per cent from the targeted 3.2 per cent. Despite the upward revision, the government could achieve the revised target only after cutting capital expenditure by Rs 36,000 crore.
The government’s target of achieving gross tax revenue as percentage of GDP at 12.1 per cent (direct tax 6.6 per cent and indirect tax 5.5 per cent) in 2019-20 against 11.9 per cent in 2018-19 is unrealistic
The government had set fiscal deficit target for 2018-19 at 3.3 per cent of the GDP. But fiscal deficit in the first eight months of FY19 till November 2018 stood at Rs 7.17 lakh crore, or 114.8 per cent of the Rs 6.24 lakh crore target for the full year. In the remaining four months of FY19, another Rs 20,000 crore will be spent on income support to farmers.
Further, the decline in tax collection threatens to destroy the already dilapidated fiscal architecture. Figures for April-November show gross revenues from central taxes in 2018-19 increased by hardly 7.1 per cent over the same period the previous year as against the revised estimates of 17 per cent growth in revenues in 2018-19 over the previous fiscal. Revised estimates of CGST revenues for 2018-19 are already below budget estimates by Rs 1 lakh crore. The government got Rs 6.43 lakh crore as against budgeted target of Rs 7.43 lakh crore.
Hence, the government’s target of achieving gross tax revenue as percentage of GDP at 12.1 per cent (direct tax 6.6 per cent and indirect tax 5.5 per cent) in 2019-20 against 11.9 per cent in 2018-19 is unrealistic. Fiscal deficit may further rise in 2019-20 as another Rs 75,000 crore will have to be spent on income transfer to farmers and Rs 18,500 crore in revenue will be lost from the change in income tax exemption.
But, shockingly, Goyal has asserted that fiscal deficit would be 3.4 per cent of GDP in both the current and next fiscal. But this can be achieved only by fudging budget figures, curtailing expenditure or deferring expenditure for subsequent years, known as off-budget financing. Transfer to the GST Compensation fund may be curtailed, too. The government may force the RBI to pay interim dividend or part of its reserves to the government to tide over fiscal crisis. The government has taken recourse to such unethical measures in the past, too, as the CAG has indicted the Modi government for propensity to borrow funds using “off-budget” methods and severely understating the true extent of deficits. For instance, the government spent Rs 75,503 crore on food subsidies in 2014-15; but carried liability of Rs 45,633 to the next year. This trend is more discernible in subsequent years too.
Speaking of his expectations from the interim budget, Raghuram Rajan had said it should be a “responsible” one “because, after all, there is not that much spending that one can do”. But government presented an irresponsible budget which never addresses the problems plaguing India such as inequality, unemployment, poverty and abysmal position in international indicators. Declaring schemes without raising resources by taxing the rich nullifies the very purpose of a budget. Instead of trying to improve the standard of living, the budget speech glorifies past performance and camouflages failures of the Modi government.
The writer is an Odisha-based economist and columnist. e-Mail: email@example.com.