The last Budget of the present Government comes after a prolonged period of uninterrupted acrimony between the Government and the Opposition. Mutual respect for opposing views is long gone and impending elections have made many healthy traditions disappear.
No Economic Survey has preceded Union Budget 2019, which should have been a Vote-on-Account alone had Parliamentary conventions been followed. Rather, defying tradition, a caretaker Finance Minister has tried to set the pace of the Indian economy for the coming Financial Year with no guarantee that he and his colleagues would be around when the Budget proposed by him is put in operation.
Unsurprisingly, the Budget speech of the Finance Minister was high on promises and rhetoric but left a crucial question unanswered. With no new taxation measures proposed in the Budget, it is not clear from where the expenditure on the dole to marginal farmers, relief to marginal tax payers and the slew of populist schemes outlined would be financed. Given their huge requirements, resources for ambitious ongoing programmes like Ayushman Bharat may also not be easy to marshal. The Budget appears to have been balanced by over-estimating the receipts for Financial Year 2019-20, since the Finance Minister has posited that tax revenues would rise by 13.5 per cent without any new taxation proposals and after granting a number of new deductions.
Significantly, Budget Estimates for 2018-19 project a shortfall of Rs 1 lakh crore in GST collections. Coming to the crux of the matter, the Finance Minister has only presented a Vote-on-Account and sought the approval of the Lok Sabha for a grant to cover expenditure for the first four months of the financial year. Therefore, his Budget Speech can only be seen as a declaration of intent and not a blueprint which the Government would necessarily follow in Financial Year 2019-20. The importance of the Budget is not what it was in earlier days. Goods and Services Tax (GST), which accounts for more than a third of the Government’s revenue receipts, is outside the direct control of Parliament.
Then we have sharp accounting practices like the Government meeting its disinvestment target by one PSU pumping funds of into another, an example of which is LIC investing Rs 25,000 crore into IDBI. Such window dressing more suits corporates while presenting their annual accounts rather than the budget document of the Government of India. The absence of the Economic Survey, which is traditionally released just before the budget, is being deeply felt because the Survey gives an unbiased overview of the economy and provides many useful suggestions to the budget makers. Universal Basic Income, which has been partially implemented for small farmers as Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) was first suggested in the Economic Survey of 2016-17. It is quite another matter, that the sum of Rs 6,000 per annum, which is to be given to small farmers retrospectively from December 2018, would not make a dent in their poverty.
In the circumstances, it could be surmised that the assurance of the Finance Minister that payment of the first instalment of Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) would be made by April 2019 appears to be more of an election bribe rather than a measure aimed at the welfare of farmers. It goes without saying that the right time for introducing long-term welfare measures is at the beginning of a new Government’s term and not when elections are looming.
While on the subject of Economic Surveys, one may also note that most of the recommendations made in Economic Surveys of the past few years have not found place in successive budgets and have been relegated to being talking points at various economic fora. The credibility of the statistics forming the basis of the Budget is also an issue, with the Government coming up with different figures at different times. Statistics regarding unemployment have not been released for the last two years. Recently, two independent members of the National Statistical Commission, P C Mohanan and J V Meenakshi resigned because the survey on employment postdemonetisation, approved by the National Statistical Commission was being held back. GDP statistics were revised some time ago and again a day before the Budget. Such jugglery makes one doubt even the positive achievements of the Government. Any projection (including Budget projections) based on doubtful premises itself becomes open to doubt.
To add to the Government’s woes, the financial sector has been in turmoil for quite some time. Recently, we had the unedifying spectacle of the Governor of the Reserve Bank of India resigning after arm-twisting by the Government. An earlier Governor, a Nobel hopeful, had left after the Government made it clear that they had no use for him. Eminent economists appointed by the present Government like Arvind Subramanian, who was the Chief Economic Adviser to the Government of India and Arvind Panagariya, who was the Vice-Chairman of Niti Aayog have resigned, without completing their tenures. It would appear that the Government cannot countenance anyone holding a view different from its own, a dangerous trend because economists and civil servants are appointed to give unalloyed advice. Of course, the Government is free to reject any advice tendered to it but shooting the messenger delivering unpleasant tidings is not expected of a democratic government.
Fiscal consolidation, which was tom-tommed as a great achievement of the Government in the first three Budgets was only mentioned in passing in the Budget Speech 2019, probably because the fiscal deficit target has been overshot in both the last year and the current year. The Finance Minister optimistically assured Parliament, without giving any reason, that the Current Account Deficit, which stands at 2.9 poer cent of the GDP would fall to 2.5 per cent of the GDP by March, 2019.
Making incomes tax-free up to Rs 5 lakh, one of the most populist measures in the Budget, was long overdue because the lower limit of Rs 2.5 lakh had been unchanged for the last five years and inflation had eaten away a large part of the disposable income of marginal taxpayers. However, there is no consequential relief for taxpayers with taxable income exceeding Rs 5 lakh. Other than marginal tax payers, only builders have got a reason to smile because notional rent from their unsold flats would be brought to tax only after two years of vacancy.
Piyush Goyal is a Chartered Accountant and well-versed with the intricacies of finance and taxation. He has done quite well within the limited scope of an interim Budget. Simultaneously, Mr Goyal has fully justified the trust reposed in him by his party by weaving a credible dream for the public. This is all that could be said about Budget 2019.
(The writer is a retired Principal Chief Commissioner of Income-Tax.)