Beyond growth numbers: A balancing act by Jaitley

K Yatish Rajawat

market_shareMiddle class and the markets seem to be disappointed by the budget as its expectations were sky high. The perception also that has been built up in the run up to the budget, particularly the disservice done by the revised GDP numbers, belied the fact that the buoyancy in receipts that should come from growth is missing.

In such an environment the situation gets further complicated with the accusation swarming that the government is pro-corporate or anti-farmer. This anti-farmer perception is not helped by factions of the Sangh Parivar reinforcing it. In an environment with little headroom on revenue front and no leeway on expenditure with the economy demanding a push. The situation has actually not changed much from 2013-14 when the private sector had frozen investment.

The budget numbers, particularly the tax revenues, give a better indication of the economic growth or the lack thereof. The actual gross tax revenues in 2013-14 were Rs. 11,38, 733 crores and Jaitley’s last budget had estimated this to grow to Rs. 13,64,524 crores, a growth of almost 20 per cent ( 19.82 per cent). This was an optimistic growth target and was fed by the same hype that is currently feeding the perception of high economic growth.

Budgetary estimates are generally higher than actual receipts and are never fully accurate. But the revised estimates of 2014-‘15 now show the tax revenues are at Rs. 12,51,391 crores, a growth of approximately 10 per cent.

The lack of any headroom in growth inspite of projecting an 8.5 per cent growth rate has made Jaitley wary of any big spending.

There are some notable things that this budget will be remembered for besides being cautious. Let me enumerate a few of them.

1. Laying down a road map for reducing corporate taxes, and reforming the corporate tax structure by removing exemption.     This is Jaitley’s ‘Saral’ taxation attempt for the corporates.

2. Creating a super regulator out of Securities and Exchange Board of India by bringing the commodities regulator under it.

3. Creating a model for infrastructure funding beyond the PSUs and government bodies

4. A bankruptcy law — a first for the country that will ease the process of closure of NPAs.

5. Creating a consumer protection agency for financial consumers across all asset classes: a very important thing from consumers point of view.

6. Treating rail, roads and irrigation as infrastructure providers from a tax point of view and allowing them to raise funds through funds. Auto sector that depends upon roads, the country that depends upon the railways and irrigation for farmers will thank the FM for a long time.

7. Freeing the small entrepreneurs by giving employees and option of choosing between ESIC and PPF. If he can continue this with allowing small businesses the option of not registering for provident fund will help in the ease of business.

8. The lack of any investment on Smart city especially after allocating a piddly Rs 2000 crores last year will also be remembered.

9. Creating a plug and play model for the infrastructure sector; though what does it exactly mean is not clear. But if he can award projects assuring all clearances and land and then invite bidders he would have created a first for the government. Therefore a caution is needed before we celebrate.

10. Mudra bank is also an interesting beginning as it will atleast control and maybe in the future also help in regulating the MFI sector. This would also help the MFIs build scale and get access to credit at a much better term.

There are more things that this budget can be remembered for but not for being bold or for taking risks. FM has been more cautious and has not been swept by the hype that the market and rest of the country is swimming in.

(K Yatish Rajawat is a policy commentator and senior journalist based in Delhi, he tweets @yatishrajawat)