Great Budget
For Capital Expenditure And Railways, Not Bad For Direct Taxes
Finance
Minister Nirmala Sitharaman began her speech by calling this budget the first
one in Amritkaal. The reference, and indeed the implicit branding, is towards
the next 25 years, during which India is expected to change for the better
beyond recognition. India will become an
$20 trillion economy over the period, with a reasonable per capita income
as well.
A symbol in
a budget initiative illustrates the point. India is going to give a big thrust
to the R&D for laboratory grown diamonds which are otherwise
indistinguishable from natural diamonds, except for massive cost advantages. In
fact, many customers are sold these laboratory made diamonds abroad at the full
price of equivalently sized natural diamonds. At present heaps of them are
willy-nilly imported for processing in India, before being largely reexported.
So, to grow them ourselves, will be a great boon. This is one new initiative
that certainly went down very well in Surat.
For long
there has been a school of thought that called for a doing away with the thicket of exemptions in direct taxes. Last
year, in response to this, the government offered a dual option. The old scheme
with its various tax savings schemes, and another, with a lower taxation rate
but no exemptions.
Unfortunately,
there were few takers for the new scheme, because one could pay less taxes by
using the various exemptions in the old scheme. This year, presumably to revive
the new scheme, the Finance Minister Nirmala Sitharaman has sweetened it. This
has been done to reduce, if not do away with the beneficial arbitrage aspects
of the old scheme versus the new. The detailed calculations will have to be
done, but if the new scheme is the more attractive now, it kills two birds with
one stone. There will be less complicated tax calculations involved in using
the exemptions, and actually lower tax liabilities just by going in for the new
scheme. This works as long as the tax rates are not raised again in subsequent
years.
On the face
of it, the salaried middle class is very pleased. The Finance Minister even reduced the
surcharge on the highest slab to attract more of the well-heeled users.
Likewise,
the stock market, that went up steadily during the minister’s speech, and stayed
up after it ended. It got nothing, but at least there were no nasty surprises.
Cigarettes taxes
have gone up 16%, but taxes on apparel, somewhat inexplicably, have also gone
up.
The first
half hour of the Finance Minister’s speech was concerned with the poorest of
the poor, with a flurry of incentives and outreach efforts. There is an effort
to encourage women in the rural workforce to increase their social security.
Digitisation in agriculture, crop improvement initiatives with public- private
cooperation, were spoken of. Millet production and popularisation is to receive
a thrust. Fisheries and animal husbandry were also favoured, alongside more
schemes for tribal people, particularly the most backward and vulnerable amongst
them. The government will promote greater R&D in agriculture. Mangroves and
wet lands are to be nurtured. Storage facilities are to be greatly enhanced for
agriculture. However, there was no mention of the Blue Water Economy.
There is a
careful consideration of the green economy to reduce India’s carbon footprint,
in context of its its problematic dependence on fuel imports. Alternative
fertilizers will be promoted, 10,000 bio-input resource centres will be
developed.
There was a
special mention of R&D for the pharmaceutical sector also.
There will
be more nursing colleges, as many as 157 new ones. Digital and physical
libraries for children. Mechanical cleaning of sewers and desludging- an absolute
requirement for any civilised country.
Hydrogen
production as an alternative clean fuel got an allocation of Rs. 19,700 crores.
This is not a large sum as yet, but this initiative has great potential in a
country that imports 80% of its petroleum. Unlike the thrust for electric
vehicles alongside, which leaves a problem of a mountain of very large, and
hard to dispose of spent lithium batteries. Hydrogen as a fuel can be
indigenously developed, the green version is actually not too expensive to produce,
and it does not have any residual waste problems.
There are
moves towards youth empowerment. It is mentioned as one of the seven leading
principles of Amritkaal, called the Saptarishis. There will be projects in
coding, Artificial Intelligence, Robotics, 3 D printing introduced.
There is to
be enhanced health infrastructure, and a mission for the elimination of Sickle
Cell Anaemia.
There is to
be a revamped Teacher’s Training Programme.
The entire
budget is seeded with new ideas, even as old initiatives like the earlier
Yojanas are strengthened. However, mention of some critical areas such as major
defence manufacturing were not spoken of at all.
The boldest
step in Budget 2023 is the enhancement of the capital expenditure budget to Rs.
10 lakh crores from Rs. 7.5 lakh crore. This represents 3.3 % of GDP, and is
aimed at a faster development of infrastructure. The Indian Railways will
receive a separate Rs. 2.40 lakh crores which will not only help modernise and
grow the railways with new tracks, but turn it into a net revenue earner for
the government,. This railway budget is nine times higher than the outlay in
2013-14.
Both these
commendable allocations should go a long way towards reducing Indian logistic
costs, a bugbear for international competitiveness in a season when we are
trying hard to attract foreign manufacturers to relocate from China. The aim is
to reduce logistics costs from the present 14%, to 9%.
There was no
mention of the PLI schemes either in the minister’s speech. An exciting idea, not
much elaborated on, is the thrust towards manufacturing one product per
district of the country, largely expected to give a boost to handicrafts
production and local employment. We shall have to see how the implementation
turns out. Data storage centres too were highlighted.
Identifying
the PAN card for more than a direct tax
identification device may turn out interesting for the millions who actually do
not have one, particularly in the rural tax-exempt areas.
Tourism in
India is always on the anvil for boosting, and this budget was no exception.
Whether the development of as many as 50 new sites will be done with enough
panache to attract new domestic and foreign tourists, remains to be seen.
However,
religious tourism into Varanasi has proved very successful. More people went to
Kashi than they did to Goa over the last year. Therefore Ayodhya should be a
block-buster once the Ram Temple is built along with all the spanking new
infrastructure there all around the city.
For an
election year budget, even the last one before the general elections next year,
it maintained its business as usual sangfroid while pointing out that tax collections
were up and the economy was doing well. It was, as if, the Modi government does not need to go in for
populism even though the cost of living has gone up significantly with all
everyday household products up by between Rs. 10 and Rs. 20. Compared to the
rest of the world this is not a lot, but its nothing to be happy about. It
remains to be seen how these price rises will affect the voting in nine
assembly elections this year for a start.
(1,222
words)
February
1st, 2023
For:
Firstpost/News18.com
Gautam
Mukherjee
No comments:
Post a Comment