By Vijay Darda | 02-03-2015
On the face of it, you cannot really find much fault with the two budgets presented in parliament last week. Both the Rail Budget from Suresh Prabhakarrao Prabhu and the General Budget from Arun Jaitley have a clutch of good features. But as an ordinary citizen you cannot really go ga-ga over these exercises unless you happen to be some direct beneficiary of the promises coming from these ministers. The prime reason being very simple. All the good that is promised through these budgets is based on as yet untested huge assumptions.
Take Prabhu’s budget first. It admits that Indian Railways is a congested operation, and the improvement in services shall come during the course of next five years only after a huge investment of ` 8.5 lakh crores. This he proposes to do through borrowed funds from institutions like insurance and pension funds that do not seek immediate returns, and can wait for long gestation periods. Quite a noble idea. However, he refuses to increase passenger fares and aims for a modest three percent increase in the operating ratio. This may seem good for him, the point is that saving just ` 11 out of a revenue of ` 100 after paying all expenses-how many things can he really fund — bullet trains, expansion, modernisation, privatisation of railway stations, better services and what else. There can be an exhaustive critique of all the ideas and projects that are contemplated, but all this has to happen while keeping in mind the track record of the railways. Can it be ignored that the Rajdhanis, introduced from 1969, and the Shatabdi brought in way from 1989 are still running at the same speed in all routes? The point is very simple. The ordinary citizen wishes the rail mantri and the Indian Railways all the best –when they want to get bullet trains or high speed corridors or for that matter any other dream project that is going to take years if not decades. But then these citizens also want that their immediate needs of getting a seat/berth in train, clean compartment and safe hygienic affordable meals are not put on hold like dreams to be fulfilled at some later date. The question that remains unanswered through these budgets is when is this going to happen?
The ordinary citizen unlike the corporate entity feels the same way about the General Budget presented by Jaitley. It sounds good for the economy, but does hardly anything to provide him an relief in terms of day-to-day life. He hears all the right noises about the economy going forward. The messages about a tough deal for the black money guys, and the sweet deals for the start-ups do show that the government’s heart is in the right place. But then there is a usual pertinent question –what is there for me? No change in the income tax slab, and two percent increase in service charge every time I take my family out for dinner. Capped by a ` 3 per litre hike in the petrol and diesel prices within hours of the budget. This surely is not a recipe for the acche din promised by the party that rode on the wave of change. Besides, it is a good thing for the corporates that they are now aware in advance that the rate of taxation shall come down from 30 to 25 in the next four years, but who knows what sort of changes shall take place in the various tax concessions that were on offer so long? It is heart-warming that finance minister looks on these concessions as incentives for growth, but if these are withdrawn in the quest for balancing the budget, then what do you say about the generosity shown while reducing the tax rate.
It is well-known that the savings that a person can achieve from his earnings are constrained by the levels of your expenses. In theory it sounds good that the tax concessions available through various incentives can help you save Rs 4.42 lakhs from your income, but then the question is what should be your level of income to achieve this quantum of saving? Besides, it also hurts that a finance minister who is sympathetic to the plight of the wage earner, and realises the injustice in a situation where a farmer gets away without any tax on his income, and the urban professional who works hard has to shell out a part of his salary as tax does not offer any change in the tax slab (a far cry from his own promise that any income up to ` 5 lakhs should not be taxable) and shows his corporate friendly face by announcing tax cuts for them.
One has to agree with the broad approach of both these budgets, as essentially these represent an element of continuity in governance. If the finance minister banks on GST and the JAM (Jan Dhan, Aadhar and Mobility) as game changers, no one should grudge the fact that a BJP government is building on the gains achieved by the UPA. The political criticism that emanates from Modi and Co. is understandable, and is taken in that context and spirit. But the very fact that the schemes initiated by the UPA are continued by the BJP is an automatic endorsement of the validity of decisions taken by the Congress-led regime. So, as long as the Modi government continues to fund MGNREGA, its criticism of the scheme becomes blunt. Ultimately, its actions and not words that count.
The ultimate tests for these budgets would be the validity of their assumptions over a period of time. For Jaitley, this would be measured on the revenue side of his budget estimates. He has hoped for a 8.1 to 8.5 percent GDP growth and this has to be reflected in the revenue buoyancy. Or else the inevitable cuts in expenditure would happen, and then considering that Union Budget 2015 marks the acceptance of public investment as the route to growth, the cumulative consequences would be less than palatable. For Prabhuji, the test would be the kind of faith he generates among his investor partners for the ambitious projects that he wishes to roll out.
Before I conclude…
The emergence of the BJP-PDP partnership in Jammu and Kashmir once again reminds us that everything is possible in the realm of politics. For weeks, a Prime Minister can rail against the baap-beti sarkar, and then get down to business with the duo. Even concede that the baap, in this case the PDP patron Mufti Mohammad Sayeed, can be the chief minister for six years, and even the Art. 370 debate be put on hold. There is only one simple message: Do not take election rhetoric seriously, and as Amit Shah would tell us a lot of it is just political ‘jumlebaazi.”