Union Finance Minister Nirmala Sitharaman presented one of the longest ever Budgets. But it is short on solutions to searing problems like slow growth, declining revenue, sluggish exports, farm distress and job losses, to name a few. It is an admission of the government’s inability or limitations in taking measures to boost demand that would lead to more production and more jobs. Demand can be created by putting more money in the hands of people. Allocating more funds for programmes like MNREGA or social security schemes would have achieved some success. But it has not happened. It seems shortfall on revenue front has the government’s hands tied. It seeks to overcome it by targeting Rs. 2.1 lakh crore from partial disinvestment of PSUs like Life Insurance Corporation. However, the target seems far-fetched as the government hasn’t been able to achieve this year’s modest disinvestment target of Rs. 1.05 lakh crore.
The government has complicated the personal income tax structure by introducing new slabs. It has reduced the tax rate, but put the condition that no tax exemption will be available to those who opt for the new structure. Now the tax-payers have to choose between two tax structures. One will have to take help of a tax analyst to decide which one is beneficial. Home buyers are in for a rude shock. Till now home loan interest, up to 1.5 lakhs, was given tax exemption, which was an incentive to buy houses. This budget, by withdrawing tax exemptions, has put lid on such hopes.
The agriculture sector is one of the worst-hit in the recent years. The government has not placed much in farmers’ plate. It seems the government, which made PM-KISAN a flagship programme during the run-up to the last general elections, has not given the same importance to it in this budget. In fact, the government has reportedly paid only 26 per cent farmers the full amount announced last year. The success of new schemes like Krishi Udaan to airlift farm products abroad and Kisan Rail to transport agricultural items within the country, though conceptually good, will depend on its implementation.
The budget has come as a big dampener to the NGO sector and religious institutions. It has made far reaching changes with regard to the registration and tax exemptions of charitable and religious institutions. All existing institutions have to revalidate their registration within three months from June 1, 2020. This will be valid only for five years and the procedure has to be repeated every five years, a major departure from the existing rules. This will give the government a discretionary power to weed out charitable and religious institutions which are unpalatable to it.
Many of Modi governments pronouncements are wishful thinking. Take for example the target of doubling farmers’ income by 2022. Presently growth in agriculture sector is around 3 per cent. It should become more than 10 per cent to double the farmers’ income, an impossible task by any reckoning. Another ambitious target is to make India a $5 trillion economy by 2024 which requires an annual GDP growth rate of above 10 per cent. Presently the GDP grows at around 5 per cent. Nirmala Sitharaman’s Budget too rests on hopes, not on ground reality.(Published on 10th February 2020, Volume XXXII, Issue 07)