An imaginative and deft balance

March 01, 2015 02:19 am | Updated December 03, 2021 08:08 am IST

Finance Minister Arun Jaitley may just have managed to achieve what some of his predecessors attempted but failed. In a performance that is striking in its imaginative balance, Mr. Jaitley has deftly reconciled the interests of business and the markets on the one hand and that of the masses, or aam aadmi, if you will, on the other, and all this without taking his eyes off the fiscal deficit ball. His second budget, which is also his first full-year one, has proposals that incentivise savings, increase social security and pension coverage of citizens and ideas to harness the idle gold lying in family lockers. For good measure, the Finance Minister has also signalled his government’s commitment to the rural jobs scheme by allocating a marginally higher sum with the promise of more if his tax revenues increase. Simultaneously, Mr. Jaitley has kept his focus on the needs of business and the corporate sector with a significantly higher allocation for infrastructure, a phased reduction in the corporate tax rate, deferment of GAAR by two more years, a microfinance refinancing agency, a law to handle disputes in public contracts and the promise to usher in a bankruptcy code this year. The only luxury that the Finance Minister has permitted himself is that of delaying the journey to a fiscal deficit target of 3 per cent of GDP by an extra year. While this may have the fiscal hawks up in arms, the fact is that the target was set earlier under the then prevailing circumstances that have changed now. And then again, Mr. Jaitley can be given the benefit of the doubt for being profligate simply because the extra spending goes towards investment in infrastructure and not for consumption.

Broadly, there are three facets of the Budget that stand out. First, the conscious push towards spreading the social security net, especially retirement pension coverage, using the Jan Dhan platform. The Pradhan Mantri Suraksha Bima Yojna which will offer accident cover of Rs.2 lakh at a premium of just Rs.12 per year and the Pradhan Mantri Jeevan Jyoti Bima Yojana which will offer life cover of Rs.2 lakh at a premium of just Rs.330 per annum are commendable plans that will take social security to the poor who need it the most. For the middle class, Mr. Jaitley has incentivised the push for retirement coverage with the promise of a generous tax-break, which in one stroke channelises savings and ensures a pension net. The second major facet is the investor-friendly initiatives as seen in the phased cut in corporate tax rate and the deferment of GAAR. The idea of an electronic bill discounting platform for MSMEs is an excellent one that will address the cash flow problems of the smallest of businesses.

The serious push to address the parallel economy inhabitants as seen by the proposal to pass a tough law against those holding undisclosed assets abroad is the third major feature. Ten years rigorous imprisonment and 300 per cent penalty on those who conceal income and assets abroad are unprecedented tough measures that send the signal that this government means business on the issue of curbing illegal foreign accounts. The gold deposit scheme and sovereign bonds are probably vehicles to get the illegal gold hoarded by the parallel economy into the mainstream though Mr. Jaitley might not admit it. The one major criticism that the Finance Minister might have to address is the fact that he is raising additional resources through indirect taxes, which are regressive as they are harsher on the poor. The middle-class might also be unhappy that there has been no change in either the income-tax slabs or the rates. They will have to wait for better times to come. Mr. Jaitley’s decision to increase the import duty on petrol and diesel is unlikely to go down well as retail prices have increased due to the trade-parity pricing formula followed by the oil companies. The devil, as they say, is in the detail and there could be other unpleasant changes hidden in the fine print. But broadly, and for the moment, the Finance Minister can take credit for tailoring a budget that balances conflicting pulls and pressures and in a difficult environment to boot. Overall, it is an imaginative and well-formulated exercise addressing the needs of growth as well as equity.

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