BUDGET 2015

3 Feb 2015
Amlesh Kanekar
Page 13 of today's Indian Express is devoted to the upcoming budget.

It seems to me that the budget exercise has come down to NOT development, but reducing the fiscal deficit. Clearly, the government's honeymoon is over. In New Delhi,  thumping of the 56" chest has been replaced by the biting of Arun Jaitley's 2cm nails.  I appreciate it.  Whatever be the motivation, a government committed to controlling the deficit augurs well for the country.  Definitely pushes us all the way to the periphery of the banana republic ball park.

Now what is being done to reduce the deficit?  This is my understanding ...

(1)Spending cuts are being imposed, including healthcare.  That's great! I didn't know public
healthcare existed in the country. Now, a  fiscally evolved and republican population would have screamed murder. Not us.  We run on emotion rather than rationalism.

(2)Stake sale in profitable public sector companies. Basically this is akin to selling the  family silver to pay debts. We are not saying "let's sell 10% in Coal India while the markets are high, we will buy back when the markets are low".  That's what promoters do, don't they?  But I guess the public's designated promoter in Rashtrapati Bhavan thinks differently or is powerless.  We are saying, "Can't meet my expenses, let's sell the shares that dad had accumulated".   The analysts are applauding - they always do when public wealth transfers to the top 1%.

(3)Tax revenues. Read this part carefully. The government is definitely concerned. It is watching the tax receipt numbers closely. But that's all - they are just hoping the numbers will be good. In other words the finance ministry is playing "she loves me, she loves me not" with fingers crossed - very tricky indeed!!!  Isn't this a bit like a farmer gazing at the heavens fondly in June waiting for the clouds to do their bit?

 

(4)Tax refunds. I might be wrong, but they seem to be actually hoping some refunds get pushed into the next fiscal so that the books look better this year-end. That's desperation.

I think here's the crux. This is what the government should have done in 8 months but chose not to. Push up direct tax receipts. Any honest industry leader in India will tell you in private that corporate tax evasion is massive (70% is the figure I often hear). Rich owners, poor exchequer. But it is too much to expect the government to go after the oligarchs. They are possibly the ones who bankroll election campaigns.