Sunday , 21 April 2019

Anatomy of a Budget

The new Finance Minister Arun Jaitley had a tough balancing act to perform while presenting his maiden Union Budget. The Budget has been largely pro-growth, with a focus on fiscal consolidation which has been commended by economists, while at the same time providing a big relief to the middle class tax payers by raising the basic income tax exemption limit. However, analysts feel that certain areas like taxation needs more refining, writes MICHAEL FISHER
A Goan office boy working in a cash-cow media company in Panaji says his family can’t afford to eat fish curry every day, because Rs 50 fetches only 10 sardines. The family of four comprises dad, mum, sister and himself who eat fish curry with rice twice in a week or seldom thrice a week. The irony is that Rs 2,000 crore has being disbursed as subsidy to the trawler owners.
We were told this Budget was going to be tough and we should be prepared for “bitter pills”. We had a sub 5 per cent growth; huge deficits of nearly 5 per cent; steep price rises, lack of trust amongst industry and government and slow diminution of faith of common citizens in our governance itself. So we needed growth, we needed demand, jobs and above all credibility and money.
To start with small steps, says Binayak Datta, former vice-president. Zuari Industries, is not a bad idea, by reducing income tax payable by individuals, increasing the threshold limits by Rs 50,000, investments deductible by Rs 50,000, increasing deduction limits on housing loan interest on self stay houses Rs 50,000. For an average citizen of say a yearly income of Rs 5 lakh, Finance Minister Arun Jaitley may be helping the common man to gain around 2 per cent of his earnings. However, it remains to be seen if this enough, given the inflation rates which are 10 per cent in retail as stated. There is a need to increase demand and hence expendable surplus in private hands. Liberalisation of FDIs in defence and insurance is a long overdue step.
The new investment allowance for investments of over Rs 25 crore in a year to a manufacturing company is also a very positive initiative to help investments. These two steps will help in bringing investments and therefore in creation of jobs and consequently demand.
A lot more attention needs to be put on agriculture – and a meager growth of 4 per cent (only 14 per cent of the GDP) is not enough where 70 per cent of the population is directly or indirectly tied. We must talk of higher yields, recycling of water, reforms in distribution and logistics and allocations for storage.
A lot more in terms of allocations should be done for tourism and culture related services. This is an area where India and more particularly our state has great employment potentials.
Just ahead of the Railway Budget, the government already collected an increase of 14.2 per cent in passenger fare hikes and 6.5 per cent in freight. Our countrymen maturely accepted this – what they wanted were better services. Similarly, by being a little more pragmatic, if we can correct our big fiscal picture, people will accept what is required is willingness and transparency.
This 2014 Budget has left the industries high and dry, says industrialist Harish Melwani. Some small changes have been brought about by way of increase of the tax exemption limits, which in any case has to be adjusted for inflation. Last year it was Rs 2 lakh, now it is Rs 2.5 lakh; nothing has been achieved. In the industrial investment atmosphere, the budget has kept aside Rs 100 crore for fast trains.
Industry stakeholders expect the GST roadmap to be brought out in this budget while addressing concerns of net revenue less is zero because of cross border some fine tuning has to be done. India is a closed economy, so what is earned is collected and remains domain within the country or state, whether cross boarder movement of goods the money will be collected at a particular point, but the goods will be moving then. The benefit flow to either the consuming state or the producing needs to be placed. When the merchant consigns the goods it will collect the taxes simultaneously, it is that money which is lost to Goa’s economy, but the issue of compensation still remains. Industries will also suffer because of the complicated GST taxation system unless it was properly explained in the budget. So how will the state get the confidence to implement it, Melwani questions. The Union Budget has become a decorative exercise with a tweak here and a tweak there, would better be left to RBI governor.
In mining, the Supreme Court order of April 21 does not permit dumping of over burden of rejects within the lease area. In Goa, the leases are small and below 100 hectares, more over the threshold value for mineral has gone down to 35 per cent Fe content and that effectively means that we’ve to evacuate any material which above 35 per cent. No mining plan has a chance of getting approval, so now it cannot be dumped within the lease and outside the lease. It is obvious that whatever is extracted has to be processed and sold. Here too is a problem, the lease is only for iron ore and manganese ore and other mineral, the miner has to apply for another lease of associated minerals.
CII Goa, a business lobbying group, is tailoring industry policies and is going hammer-and-tongs to push for MSME clusters, which is the growth engine. An effective legislature will be shortly introduced for ease of doing business in Goa and once the Investment Promotion Board is formed it will be empowered to act in this direction, says CII chairman Kirit Maganlal.
“We are coming out with several solutions for increasing Goa’s GDP, which in 2012-13 nominal GDP declined to Rs 34,965 crore from the previous year GDP of Rs 36,025 crore. By this year end the aim is to lure Rs 5 crore of investments in the fields of enhancing production, manufacturing and improving the services sector,” he says.
Since the closure of mines, no revenue from this sector has been generated, but tax collection has grown exponentially. The recovery base has become wider. Even the car market in goa is saturated affected by the ban of mining, say car dealers. Efforts are on to unfreeze locked land such as SEZ, communidade and unutilized industrial plots. The process has started for lease transfer available land. The development impact is due to the present freeze in unused land. Look at it this way, says Verna Industrial Association (VIA) president Prashant Shinde; this Union Budget is from a non-collation government whose intentions are constant development. “We were lacking in direction which is now going to change. In the IT and housing sector the benefits are written on the wall by Rs 50,000. FDI in defense has gone up to 49 per cent this may draw Indian overseas investment funds,” he says.
The government is planning 100 smart cities, and Panaji may be one such city, but one cannot forget the unemployment scenario in the rural. This can be resolved with small scale clusters of six to 10 ancillary units set up in talukas; this should not be difficult to attract small-scale investors. Invite small scale investors, says Shinde.

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