Union Finance Minister Arun Jaitley on Friday trashed the Opposition’s charge of fiscal mismanagement, stating that the four-year-old NDA government’s journey was that from a state of policy paralysis to structural reforms.
Replying to the Budget debate in the Rajya Sabha, Mr. Jaitley expressed surprise over former Finance Minister P. Chidambaram’s charge that by reducing corporate tax to 25% for companies with turnover up to ₹250 crore, he had favoured the corporates.
Corporate tax rates
Mr. Jaitley said it was Mr. Chidambaram, who as then Finance Minister had drafted the Direct Tax Code mooting the idea of 25% corporate tax. The NDA government is also considering a legislation changing it to the turnover criteria for classification of industries. For medium scale industries, it would be ₹250 crore, he said.
The Finance Minister said the idea behind lower tax was to enable MSMEs to invest more, which would create more jobs. The same trend was noticed in the United States (with below 20% corporate tax) and other competing economies. Owing to this, while covering 99% of industries, the revenue forgone would be ₹7,000 crore, whereas implementing it across the board would have cost ₹40,000-50,000 crore.
MSP calculation
Clarifying on MSP+50% fixation for farmers, Mr. Jaitley said indications from the Agriculture Ministry were that the basis for calculations would be A2 Cost (actual paid out cost) +Family Labour. It would set a benchmark for future governments, said the Finance Minister, while conceding that challenges in effective implementation —as highlighted by several members — did exist.
Mr. Jaitley also assured the House that the proposed health coverage plan for 10 crore families would in all likelihood be implemented completely this year.
On expenses, the Finance Minister said the basic principle was that the bigger the size of population, the lower the per capita premium. He said it would be affordable, adding that the NITI Aayog had carried out an assessment.
When Congress MP Jairam Ramesh sought a clarification on State-Centre sharing of expenses, Mr Jaitley said the NITI Aayog would consult all the States. The Minister said he and in the larger interest, he hoped, all would come together — as it happened in GST implementation — to achieve the objective.
On the 10% long-term capital gains tax on investments in stock markets for gains exceeding ₹1 lakh, Mr. Jaitley said with the economy being on a far sounder footing, the question before the government was to whether give exemptions to high net-worth entities. Last year, the income exempted under this head last year was ₹3.67 lakh crore.
Mr. Jaitley said owing to demonetisation and then GST implementation, the tax net had increased significantly. GST collections would increase further as anti-evasion measures would be taken.
Comparing NDA’s figures with that of the last few years of UPA government, the Finance Minister claimed that on all fronts, including DGP growth, Modi government had faired well. While in the past three years, UPA rule recorded 9.4, 10.4 and 9% inflation, under NDA regime it ranged 2-3% and this year, it averaged 3.6%.
Revenue deficit for UPA peaked at 4.9% during the period, but in the past four years, it touched a minimum of 2.1%. While UPA had an “unacceptable” level of current account deficit, under the BJP rule it had been less than 1%.
Mr. Jaitley said NDA’s spending on projects were often more than the projected estimates, like in the case of MNREGA where against ₹48,000 crore estimate, ₹55,000 crore was spent and this year too, the same amount had been given. Spending on rural roads had gone up manifold and ₹1.7 lakh crore was allocated for food subsidy.
