Modi govt’s much-expected budget of this year was a classic example of “Much ado about nothing” as Jaitley has been consistently parroting about containing the fiscal deficit under 3%. Now pushing of Fiscal deficit target of 3 per cent by one more year is like moving the goal post every year. Jaitley set and reneged on his target of containing fiscal deficit twice within four years which dents India’s credibility.
Now If Modi Govt would come with such visionless budget than why should not the premier rating agency Moody not degrade India as barely investment grade? The combined deficits of the central and state Govts are now almost 6-7% of GDP which is among the highest in the world.
The total fiscal deficit in Modiraj is higher than the level at which many countries have gone bust. Modi is clueless that India survives high deficits only because of high savings and growth rates and not because of anything else. This year’s budget leaves India looking vulnerable and lacking in political seriousness which in turn leads to the highest inflation and interest rates among major economies.
Jaitley appointed an Expenditure Management Commission in 2014 to contain wasteful spending which sunk without trace. Modi Govt cut the rate to 25% for companies with a turnover up to Rs 50 crore but these are not companies typically competing with Asian neighbours.
Jaitley has lost a golden opportunity to convert demonetisation into a political winner. Modi should have distributed part of the demonetisation windfall from his crusade against black money to the masses which he failed to do. Modi also got a huge tax windfall from the second voluntary disclosure scheme linked to demonetisation which again he didn’t use prudently.
Modi Govt could have easily put a few thousand rupees into each of 26 crore Jan dhan accounts, establishing a link between black money captured and cash benefits to the masses. It could have been proved a jackpot for him during the current assembly election in progress in the state of Punjab, UP and Punjab.
To cleanse political life, Jaitley has cut the maximum cash donation to parties from Rs 20,000 to Rs 2,000 which would only increase bogus entries of Rs 2,000 each by ten-fold. Mr Modi should know that only a tiny fraction of political money enters into party books, so the measure of decreasing political donation is toothless.
Finance Minister Jaitley proposed electoral bonds to attract legitimate political contributions but both donors and parties prefer black deals. There would be another risk involved as electoral bonds will become a way of holding black money since these will be bearer bonds, which are used by drug lords globally. FM’s new cash limit of Rs 3 lakh per transaction will be ignored in all likelihood by rural India and the informal sector.
Those who keep transactions black will shrug by the transaction limit of 3 lakh introduced by Jaitley. Taxpayers would easily split large transactions into several transactions of Rs 3 lakh each and Modi Govt’s transaction limit will just fail to be an effective tool. Finance minister Arun Jaitley’s fourth successive Budget, presented on Wednesday, was a bland one, like his three previous presentations. The tone of budget reflects Jaitley’s uncomfortable temperament with rhetoric & the situation post-demonetisation.
DISCLAIMER : Views expressed above are the author’s own.