Finance Minister Arun Jaitley’s fourth Budget turned out to be a damper for Kerala as it failed to meet the high expectations of the state. Apart from the big misses like AIIMS and railway coach factory,
the Budget turned a blind eye towards the concerns of the rubber sector, NRIs and ailing PSUs.
Pramod Thomas takes a look at the impact the Budget will have on the key sectors.
Budget gives ’em no rubber solution
Rubber farmers in the state are now a relieved lot as the prices have bounced back after a long gap. But, they attribute this phenomenon to ‘divine intervention’ rather than the efforts of the Central Government, which, they claim, have abandoned them completely. And, the Union Budget presented by Finance Minister Arun Jaitley bears testimony to this fact.
Apart from allotting Rs 142.60 crore to the Rubber Board, the woes of the beleaguered rubber farmers found no mention in the 2017-18 Budget. The long-pending demands of growers include agriculture status for rubber farming and issuance of subsidy amount to the farmers, which has been pending for four years now. This apart, the stakeholders in the sector have also sought steps to boost rubber exports.
“It is highly unfortunate that the Budget failed to address the concerns of the rubber sector. We had faced similar situations in the previous years too. So, we kept our hopes low. But, it seems the growers in Kerala had the blessings of god. Heavy rain in major rubber-producing countries has resulted in price rise overseas. This has forced companies to source latex domestically, fetching good price for the growers here,” said Tomy Abraham, president, Indian Rubber Dealers Federation.
Tomy Abraham’s argument can be substantiated with the Budget allotment to the Rubber Board, which is entitled to promote the sector in the country. This year’s provision to the board is the lowest in three years. In monetary terms, the allocation in 2017-18 is around Rs 60 crore less than the fund allotted in 2015-16.
Despite the raw deal meted out to them in the Budget, rubber growers in the state manage to stay afloat, thanks to high prices abroad.
Currently, the growers in the country are getting Rs 159 for per kg of rubber, the highest price in three years. The NR price, which increased by 69 per cent in one year, is expected to touch Rs 200 per kg before April. The average global price now is Rs 189 per kg. “Even as there is no budgetary support, the industry hopes that the price will touch Rs 200 per kg before April. The growers have been asking for an increase in import duty to stop imports, but to no effect,” said Cochin Rubber Merchants Association president G P Goyal.
Challenges ahead
The total rubber production in 2015-2016 was 5.63 lakh tonnes and in 2016-17, it is expected to touch 6.54 lakh tonnes. The estimated output in 2017-18 is 7.5 lakh tonnes. Increased production and global changes may have an impact on the prices. Unfortunately, the Budget failed to address these issues in the rubber sector with a long-term perspective.
PSUs get no special undertaking
The Union Budget presented by Finance Minister Arun Jaitley has fallen short of expectations on many counts as far as the state is concerned. Even as the total fund allocation increased by Rs 2,000 crore this year, the Budget is a big letdown for the state as it was looking towards the Centre with a handful of demands.
The Budget offered precious little by way of allocation to major public sector undertakings (PSU) located in the state. Also, there is no major announcement regarding the cooperative banking sector which has a total deposit of Rs 1.27 lakh crore in the state. “The policy of the Central Government is to support only the Maharatna and Navaratna companies, leaving the rest of the firms to die. This is evident from the Budget as no special packages were announced to rescue the ailing PSU companies,” said M P Sukumaran Nair, chairman, Public Sector Restructuring and Internal Audit Board of Kerala.
Diaspora unhappy
Remittance by the diaspora has always played a significant role in the country’s economy. But, the NRIs feel despite pumping in thousands of crores of rupees into the country each year, the Union Budget failed to address their concerns or announce any welfare scheme for them.
Of the 2.6 crore Indians overseas, non-resident Keralites (NRKs) account to 25 lakh - 9.6 per cent of the total Indian disapora.
In 2015, expatriates remitted $69 billion (around Rs 4.69 lakh crore) to India, of which around Rs 1 lakh crore was received by Kerala. But, the World Bank report suggests that India may receive a remittance of $65.5 billion in 2016, a drop by 5 per cent. It clearly indicates a crisis situation, which will push many NRIs, including those from Kerala, into an uncertain future. Unfortunately, the budget has failed to provide any relief to the community, on which a lot of dreams back home are shouldered.“The NRIs do not have much to cheer about except the removal of prior sanction for FDIs. The much-awaited health insurance scheme for the returning NRIs did not find a place in the Budget,” says Dr Azad Moopen, founder chairman, Aster DM.
According to K V Shamsudheen, chairman, Pravasi Bandhu Welfare Trust, the Budget failed to address the needs of the NRI community. “There was no mention in the Budget about NRIs, though they had remitted around US$70 billion in 2015 to the country. The NRIs had raised various demands, including using of the skill sets of Gulf returnees for the Skill India project as trainers; age relaxation for Gulf returnees, who come to India after losing jobs, to apply for jobs; permitting NRIs to invest in agricultural land, reducing tax on Interest from NRO account on par with resident accounts,” says Shamsudheen.
Nothing to rev up automobile sector
Barring the general statements, the Budget has not announced any booster that is specific to the automobile industry.
“The Budget fell short of our expectations as those in the auto retail business were anticipating a slew of measures, including higher depreciation on vehicles and incentives for scrapping old vehicles. We were also expecting a reduction in the charges for payments received through credit card, which would have gone a long way in promoting cashless transaction,” said Federation of Automobile Dealers Associations president John K Paul. He expected suggestions on raising the depreciation rate and incentives for scrapping old vehicles before the Lok Sabha passes the Finance Bill.
“Though there is nothing much for the automobile sector in the Budget, we expect the government to adopt pro-business policies on a continual basis that would benefit the industry,” said Renault India Country CEO Sumit Sawhney.
“A major announcement the automotive sector expected in the Budget was on GST roll-out, and how different categories of vehicles will be taxed. Another area that deserved attention is the vehicle scrappage policy. However, synergistic investments in rail, road and water transportation will ease supply-chain operations and benefit the automobile industry, thereby bringing down logistics costs,” he said.
According to Volvo Auto India managing director Tom Von, the Budget proposals to incentivise and promote infrastructure augurs well for the auto sector and the whole economy.
“The focus on rural economy is encouraging. While it was anticipated that there won’t be any major change in indirect taxes in view of the impending GST implementation, measures to promote green technology would have given customers more options while choosing environment-friendly vehicles,” he said.