As the finance minister rose in Parliament to present the Budget, one could not help but wonder how acutely the tag given to India— “A land of contradictions” applied to his job at hand.On the one hand, political imperative of presenting a ‘popular to the masses’ (populist) final Budget of the current government and on the other hand, the necessity of having at least a semblance of adherence to the long-term goals of the Fiscal Responsibility and Budget Management Act, 2003 (FRBM). Similarly, the great need to spend on upliftment of weaker classes versus a requirement of lower taxation structures to align the economy to global trends. The challenges were many.
Given the constraints, one would not hesitate to say the finance minister has done a commendable job. Moving along the path towards long-term objectives while not losing sight of short-term requisites is indeed a difficult ask that he has mastered over the past few Budget exercises. This Budget also exhibits a fine balance between the pushes and pulls of various stakeholders in our society.
To delve a bit deeper, measures to enhance living conditions of the poor and safeguard them from exigencies and emergencies are to be applauded. These include further progress in providing electricity and clean fuel to deprived households and the focus on health and death benefits, so that individuals can live a life of dignity without fear of the unforeseen. Agriculture and micro, small & medium enterprises (MSME) have been taken as the backbone for employment generation and well being of masses in the weaker sections. It is appalling to note that more than 86 per cent of farmers fall in the category of ‘small and marginal’.
Infrastructure development in terms of developing smart cities, the Bharat Mala roads project and the upgradation of the Indian Railways is a step towards creating sustainable assets in the economy. More initiatives could have been taken on the ambitious river linkage projects which will help irrigate large tracts of agricultural land as well as reduce the incidence of floods in the country.
Indirect taxes now go beyond the scope of the Budget after the introduction of a common goods and services tax nationwide. In terms of direct taxes, personal income tax was not tinkered with too much, while a relief of five per cent in corporate income tax rate to a larger group of companies is welcome. High disinvestment targets are also steps in the right direction.
On the negative side, slippages on fiscal balance (deficit) continue to be a cause for worry. Also, introduction of long-term capital gains tax on equities contradicts the overall objective of providing risk capital to growing businesses. Over a longer term, these investments need to be compensated higher due to the greater risk of volatility that they carry.
The author is the Founder of Five Rivers Portfolio Managers and can be reached at pankaj@5riversindia.com