A budget with its feet firmly on ground and eyes on future,
a budget which is pragmatic but has lots of ambitions... a budget which builds
the ground for a strong and prosperous India ..a budget which is path breaking
because of the basic structural changes it brought about the philosophy of how
the distribution of wealth has to be done , an amazing budget for the
futuristic thought of building a social net of pensions and insurance for all
but that coming not as freebies but coming as an instrument of savings which
will fuel further growth and will at the same time secure the lives of 100's of
millions which will start aging in coming decades... a pro enterprise budget
where the impetus of building a new India lies with 57 million entrepreneurs and
not in the hands of few corporates.
Understanding the challenges?
Coming down to specifics the union budget had some basic
challenges to go for the big bang reforms. Some of the big reform ideas that
were looked in the budget by different sections of society could be broadly
divided as following
Corporate Angle: The corporates were looking on
how the government will go ahead for implementation of GST, labor reforms which
improve the ease of doing business and how govt would go for kick starting
private investment in infrastructure projects
Electoral Angle: politically the budget would have to
be viewed on some of the promises that Modi Sarkar made during the elections
which were around the issue of black money
Common Man- Middle class: From the perspective of
common man the budget would have been looked on how much does the finance
minister leaves in the hand of middle class. How the FM would go about creating
an environment where more jobs can be created and entrepreneurship is
encouraged.
Poor and Labor class : This part of society had apprehensions if the
govt would move away from the subsidy and dole raj which the earlier regimes
had built and if that taken away immediately would have had a catastrophic
impact on their livelihood
How the govt did?
So let’s evaluate how did the government did on all these
aspects and did the govt made any progress on any of them or showed the intent
with a roadmap to address each one of them.
Spending on Infrastructure
In the early months after taking up charge in May 2014 the
Modi Sarkar moved away from an era of policy paralysis and swiftly gave
clearance to projects worth billions of dollars. However years of paralysis had
made most of companies invested in infrastructure projects sick. So when things
started moving in May 2014 it was a welcome change but it came a little too late.
More was needed to bring back life to economy. It was a realization that
private investment will not come in the immediate future to bail out Indian economy,
the only option left was government spending on infra projects till the time
the investment climate in country improves and brings down rate of interests
when private companies can get a breather and the investment cycle can begin.
It is in this context that the 70,000 crores on infra projects
by the govt will be a great push which will act as a catalyst for reaching near
the goals of trillion dollar investment on infrastructure.
Ease of doing business – GST, Labor reforms
Labor reforms and GST will be the pillars on which ease of
doing business can be improved in India. However both are easy said than done. GST
would require the economy moving to an indirect way of taxation rather than the
current way to direct taxes which covers a very small percentage of Indian population.
It requires a lot of talking to the states and convincing them of the share of
revenues that states get will not get affected even when GST is in place. It is
in this context that the increase of net proceed of states to 62 percent should
be looked upon. If the states are convinced of their fair share in taxes the
opposition to GST will go away. The increase of service tax to 14 percent is
also a step in that direction where the govt is slowly preparing to reach to an
indirect tax level which may be near to the GST tax levels.
Labor reforms is another tricky subject which may create the
same amount of opposition that the land ordinance bill is doing now. The trick
therefore is to prepare the ground for labor reforms, it is here where the
creation of national pension scheme will play its role.
Reducing corporate taxes, moving away from an era of corporate
exemptions which will make the domestic industry competitive against global industries,
easy of filing bankruptcy are another few important steps that the govt has
taken to kick start the domestic manufacturing and other industries.
The implementation of GST and labor reforms therefore all
look to be in the budget of 2016, ground has been prepared for that.
Black Money
Bringing back Black money has been a huge issue politically
and BJP has delivered on this front. Right from setting up of SIT on the first
day of govt to bringing back up to 20000 crores till this date has been good moves.
What was pending was making this a prosecutable offence which will make getting
up black money information from other countries easier. The govt has lived up to
its promise on this which was a big political promise they had done. In coming
future we will start seeing the benefits out of these steps.
The salaried class
First in the interim budget and now in the current budget
the FM has given huge tax savings to the salaried middle class by first
increasing tax slabs from 2 lakh to 2.5 lakhs and now giving further tax saving
tools in pension, higher health care deductions and conveyance allowance. Just
in this budget a total of Rs 14338 is saved in taxes by the salaried class if
they opt for the various tax saving schemes the govt has provided.
The poor
As I mentioned earlier there were apprehensions on one side
by the poor and expectations on the other side by the economists on the
direction that the Modi govt will take on the subsidies. Taking away the
subsidies would have had a catastrophic impact on the rural farm wages. The Modi
govt has however played a masterstroke in this field. By achieving a target of
12.5 crores bank account in the Jan dhan yojna the govt has ensured that every
penny of subsidy it provides reaches to the actual beneficiary. Therefore
without increasing in actual terms the subsidy amount the govt has continued
with the same allocation. In coming few years with an improving economic scenario
the amount spent on subsides will come to a realistic level. The govt has
therefore acted pragmatic and has shown off its pro – poor side even when its
share of funds had reduced drastically after increased share of the states.
There are other good news where the govt has put a lot of
focus like innovation, electronics industry , creating an startup fund and
making it much more accessible to entrepreneurs , creating 6 crore toilets
taking up preventive health and swach bharat seriously. It is now left to implementation
of these ideas, there is another hint that this govt keeps giving is the
thought that not all actions will come in budgets which are often highlighted events.
In coming months we will slowly and gradually see India moving to the blueprint
given by the Modi Sarkar ..ache din are a work in progress and India has exciting
time ahead in coming days
