|Don’t postpone budget|
|Friday, 06 January 2017 00:49|
Decision-making can’t be hostage to politics
The Congress party appears on strong grounds when, while demanding the NDA postpone the Budget because of the state elections, it cites the example of what it did in 2012 – it postponed the presentation of the Budget from February 28 to March 16, so that no one could accuse it of trying to influence assembly elections through budget promises. To that extent, it can be argued the heavens won’t fall if the NDA does the same now. Except, given how many elections India has all the time, accepting this principle could mean crippling the government for fairly long periods of time – and, in the current case, the February 1 date of the budget was announced before the Election Commission announced the election schedule for elections in 5 states. In the case of revising gas prices for instance, though the UPA had notified the decision two months before the elections were announced in March 2014, the actual price hike was put on hold due to the election schedule being announced. Though RBI had announced guidelines for new bank licenses on February 22, 2013 and the Bimal Jalan panel had given its recommendations on February 25, 2014, similarly, it had to get Election Commission permission since, on March 5, the dates for the general elections were announced – in this case, EC gave the permission, but what if it hadn’t?
Those calling for the union budget to be postponed on grounds the government will use this to curry favour with the electorate don’t appreciate how limited the room for sops is – they are, of course, also guilty of insulting the electorate’s intelligence by believing it doesn’t look at the record of a party, but just goes by budget-eve sops. While finance minister Arun Jaitley’s last budget had Rs 19,78,060 crore to spend, a fourth of this (Rs 492,670 crore) was a fixed expenditure on interest payments; another Rs 250,000 crore was allocated for defence which is, in a sense, also fixed; at a little bit over Rs 300,000 crore expenditure on salaries and pensions is also fixed … the discipline of the bond markets and the fiscal responsibility bill ensures not too much deviation from the fiscal deficit – that’s why, though subsidies are a great way to win over voters, these rose from Rs 217,941 crore in FY12 to just Rs 250,433 crore in FY17 though GDP rose from Rs 88,96,379 crore to Rs 152,54,400 crore during this period. On February 29, 2016, Jaitley’s sops on direct taxes added up to Rs 1,060 crore – surely that’s not going to sway citizens to vote the government if its overall track record is poor? In the same budget, since Jaitley got Rs 20,670 crore more of taxes from customs, excise and services, in overall terms, he ended up taxing the electorate; the year before that, Jaitley gave away Rs 8,315 crore in direct taxes but took back Rs 23,388 crore in indirect taxes.
Many of the sops that he might have announced, like interest subvention on housing loans were, in any case, announced by the prime minister on Saturday. Also, should Jaitley cut corporate taxes, keep in mind, a schedule was announced two years ago. As for reducing personal income taxes, he has been talking of this publicly for the last month, and not only was this expected as a follow-up to the demonetization since it also boosts compliance, surely the Opposition realizes lowering taxes is a part of overall economic reform and along the lines of what is happening globally? Good economics can’t be hostage to bad politics.