As fine print of Narendra Modi–Piyush Goyal budget is sieved, it only emerges that there’s hardly any fudging of figures as claimed by opposition parties and a section of analysts.
Neither was there any impropriety involved in presenting direct tax proposals and farmers income support announcement that together have an implication of about Rs 100,000 crore.
Modi–Goyal must be credited for balancing out political interests with macro-economic fundamentals and sticking to path of fiscal prudence. Former finance minister Palaniappan Chidambaram accused the NDA government of presenting ‘anti-constitutional’ budget that involved tax proposals against the convention.
But then, it was Chidambaram and the UPA government who broke this convention while presenting just vote on account. Otherwise, how does one explain his largesse to the SUVs makers in 2014 interim budget? In states, the election year virtually becomes the opportune time for chief ministers to announce proposals – both tax related and non-tax largesse – to garner votes. Opposition to such moves again is based on disadvantage that parties not in power face as a result of such proposals. Chidambaram venting out his anger could essentially be seen as the discomfort Congress has put itself into and political fallout of budget proposals made by Modi–Goyal.
Convention over the years was that finance ministers refrained from the temptation of presenting tax proposals in an election year that could be overhauled by the new government later. This would create huge issues for the industry, exporters, agriculture and individual taxpayers. In the states, transgression of this convention has been more frequent and acute.
In an open globalised economy like ours, frequent changes in taxation proposals are not advisable. It’s not advisable. Hence, going against convention may have to be re-looked at by leaders of different political parties.
Now, coming to fiscal deficit and consolidation issues that have been trumped up by several stakeholders. Fine print suggests that even with Rs 100,000 crore relief provided to farmers and salaried middle class, the deficit works out to 3.34 per cent and not even 3.4 per cent for next fiscal. Marginal stretching in deficit numbers should not become a big issue given that the total budget spending was a whopping Rs 27.43 lakh crore. This could be easily reined in even if the new government goes ahead with the Modi’s tax proposals.
Secondly, buoyancy in GST collections of January 2019 at over Rs 100,000 crore should provide some encouragement for next finance minister that the unification of taxes under one umbrella turning India into one market is finally working.
However, weakest link in the fiscal management is the non-taxes revenue i.e. disinvestments. If meeting the targeted Rs 80,000 crore this fiscal was difficult, setting a target of Rs 90,000 crore for 2019-20 was a wee bit unrealistic. There’s no doubt that Arun Jaitley was hugely successful in 2017-18 to cross the budget target of over Rs 64,000 crore. Budget numbers presented by Piyush Goyal seem credible and achievable. Well, for this to happen, the new government may have to quickly settle down and keep the reform programme on track. Most foreign investment proposals that are in pipeline will get to fructification by then and provide conducive atmosphere for joining in the revival of manufacturing sector.
One glaring miss in the budget is the formulation to break the 8 per cent GDP growth jinx and push towards double-digit growth trajectory. Modi– Goyal should have put together a roadmap for hitting 10 per cent plus growth in next three years as per a well laid out plan. Vision statement for 2030 is fine, but what happens in short term is anybody’s guess.