The Union Budget
2021-22 is being viewed as a document to consolidate, spend and revive on the one
hand and on the other an extravaganza without expanding the kitty that gives
little and takes more from every citizen. It doesn’t suit the needs of these times
of crisis, which follows two years of economic slowdown and a year of severe
recession.
It is viewed as
debt-funded huge expansion that may be good for the stock market but not for
the overall development of the people. Borrowings constitute 36 paise of the rupee
earned by the government and are bound to shoot inflation. Expenses should have
been cut on many constructions and euphoric projects like new ornamental
constructions and super-speed trains. A decision that merits praise is the
increase in healthcare allocations.
But it is also
being seen as moving from off-balance-sheet funding to the headline-deficit
funding of 9.5 per cent and shows that new spending increases by Rs 1.9 lakh
crore over the Rs 1.2 lakh crore Food Corporation of India food subsidies.
Incremental spending will be about Rs 2.9 lakh crore.
There
is a catch. The budgeted Central Government’s total expenditure of 34.8 lakh
crores in 2021-22 is identical in nominal terms to that in 2020-21 – which
amounts to slashing expenditure in real terms. Debt servicing takes a larger
cake that has risen in 2020-21 to over Rs 6.9 lakh crore is estimated to cross
Rs 8 lakh crore. In short, the government would be left with Rs 26 lakh crore
for its expenses.
The
borrowings in 2020-21 we at Rs 18.48 lakh crore and are slated to be Rs 15.06
lakh crore in 2021-22, provided disinvestments of Rs 1.75 lakh crore is
realised. Despite such huge borrowings, the allocations for projects and many
other expenses were being cut mid-year since December 2019.
The tax system has
gone through too many changes and confusing in terms of new no-concession
income-tax and conventional I-T system that allows some deductions. The tax on
EPF investment is beyond comprehension. Even the benefit of no-filing of return
for those above 75 is superfluous because if one has two bank accounts or has
any income other than interest accrual or pension, he may forfeit the benefit.
The budget should
have been kinder to the lowest 30 per cent people in the unorganised, small and
medium industry, and labourers who trekked hundreds of kilometres to reach
their homes and save their lives. In fact, every earner has been shorn off the
benefits they were having and many still do not have jobs. Taxing the provident
fund is a signal that many more savings instruments may be targeted gradually.
It does not augur well as a large chunk of borrowings come from small savings, as
per Finance Minister Sitharaman’s budget speech.
Despite clamour
from depositors not to tax their meager interest accruals, the poor savers,
retirees and pensioners are losing a large chunk to TDS on bank deposits. It is
not a prudent policy to tax the aged or push them to penury. The new car
scrapping policy is to burden them more.
It also sends mixed
signals to the farmers. The budget allocation for the department of
Agriculture, Cooperation and Farmers Welfare is slashed 8.5 per cent in
2021-22. The flagship PM-KISAN scheme, meant to provide income support to
farmers, sees a 13 per cent drop in its budget, which is Rs 10,000 crore lower
than last year’s initial allocation. However, the budget says state-run
Agricultural Produce Marketing Committees (APMCs) would now have access to the
Rs 1 lakh crore Agriculture Infrastructure Fund (AIF). The AIF cess has
been raised to 4 per cent and would impact almost every walk of life as it is
dumped on petrol and diesel prices. The nation should have looked for providing
cheaper fuel to the people at a time when international prices are at its
lowest.
Various cesses on
petroleum products raise over Rs 3 lakh crore a year, but erode the economy
through cost rise on transportation and farm inputs, leading to severe
inflation and overall hardship. A government committed to development should
realise that a nation progresses on low expenses on fuel.
The budget should
have given some novel thought to supporting agriculture. The government has to
think out-of-the-box to take the opportunity to have a fresh look at the farm
sector that encompasses the life of over 80,000 crore people and they cannot
live on the dole for long.
The government has
lowered disinvestment target to Rs 1.75 lakh crore from Rs 2.1 lakh crore in
2020-21 as pandemic affected government’s disinvestment plans. It has put on the
platter the strategic sale of IDBI Bank, BPCL, Shipping Corp, Container
Corporation, Neelachal Ispat Nigam Ltd, Pawan Hans, Air India, GAIL, oil
pipelines, seven ports and some others, including two public sector banks through
setting up Asset Management and Asset Reconstruction Company.
The move to go
through the sale of two banks and diluting stake in LIC to 74 per cent is
beyond comprehension. The LIC is in good shape and is the only honest insurance
company. The decision needs to be rolled back. The bank NPAs are not their own creation.
It happened because of interference in the work of banks since 2009. The
present step can be the beginning of selling out stakes in other banks too. So
is the nation-changing tack of nationalising the banks in 1969 or going into a
cycle of another nationalisation in a few years? It calls for reviewing such
Manmohanomics decisions at a time when the Reserve Bank of India itself is
concerned about its own health.
The government’s
ideological group in Swadeshi Jagaran Manch (SJM) is opposed to such sales. The
SJM had put a brake on NDA-I too. For it and trader body efforts the retail
sector has got a small boost as the online companies now would be taxed 2 per cent
for their sales.
The stake sale in
PSUs built over decades calls for scrutiny. Some of the finest PSUs like HMT,
Indian Airlines and Air India were victims of machinations of their private-sector rivals. The concept that the government should not own ventures is misplaced
and incorrect. The US and many European Union countries are known to owe their
progress to the PSUs. India has been taking too many flip-flop decisions over
the years.
Overall, a closer look at the Budget reveals that
it is too thinly spread and needs a thorough relook to achieve the goals of
fast development that the Finance Minister stresses. Sooner it’s done better
for the government
Author
Shivaji Sarkar
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