Monday, February 29, 2016

Test of a good budget: Balance between mindless populism and fiscal prudence

In democracy, politicians need to be trusted. As a class in themselves, they can deliver provided they shun being quarrelsome. It is expecting too much at a time when JNU row shows neta class is also divided on what’s patriotism. But left to themselves, one likes it or not, we must appreciate one simple thing, politicians know they are capable of delivering provided they try doing so.

As one of the hyper active pro-Namo FB users among friends...I got a good question from a Mumbai-based journalist Seshadri Ramaswamy. ND, This govt is going to tax pension and EPF. Are you in favour of these?.....And another indirect tax, as if enough is not there already, called krishi tax, to add to the common man's burden”.

My initial response::

“Good questions.....but there is a fiscal move. I don’t understand much of finance but I believe....this proposal is aimed at encouraging the salaried class to remain invested in the retirement fund and later on invest the kitty pension products .....Thus all these remain to be seen

The Finance Minister Arun Jaitley, we knew from beginning, had a job cut out for him. But as the Budget 2016-17 approached, Jaitley and to a large extent his Prime Minister Narendra Modi had all reasons to feel besieged.

"I have an exam tomorrow", Prime Minister Narendra Modi yesterday on the eve of presentation of General Budget in Parliament. Third from Modi regime. 
From the beginning, reviving the growth momentum, containing prices of essential commodities and altering the pattern of growth to gainful employment remained at the top of the Finance Minister's agenda. But I have always maintained this is also a country of populism and freebies. The more things government gives, the more people will be eager to get things for them -- preferably free of cost and in lieu of no hard work.

The Haryana reservation row and Patels stir in Gujarat are pointers that even well to do communities and historically considered ‘upper castes’ do not shy away from quota politics. 

But this budget was expected to be tough.....I did not expect too much of goodies.

This is 2016 and Modi dispensation has hardly about two years ahead to run the economy as fierce political opportunism would chip in by 2018 itself. Therefore this Budget was expected to be little bold; perhaps it could have been more bold.
But given Jaitley’s pro-status quo image, I am impressed by the sort of a few risks the Finance Minister has taken. Whether this helps him and his party remains to be seen?
The Environment Minister Prakash Javadekar tried to spell out Modi Sarkar’s real intent in terms of running of economic affairs.
He said, “Budget is not a Political tool”.
On its part, the government is was right in their diagnosis and also prescribing a roadmap that India has to make a choice between mindless populism and fiscal prudence. It’s more than apparent, like Dr Manmohan Singh had his Prime Minister P V Narasimha Rao’s backing, Jaitley also enjoys the same kind of confidence of his Prime Minister if not more.

To add to it, unlike Rao, who thrived in delaying taking decisions, Modi is known as a no-non-sense Prime Minister. In terms of avoiding populism at least for middle class – the crowd who take onto social networking - Jaitley has tried to work this to his advantage. Thus neo-middle class, Modi’s chief voters in 2014 could be unhappy.
But the PF and NPS tax proposals should be understood from a good accountancy point of view. Ministers like Piyush Goyal have tried to explain it properly that for PF there’s no taxation for 40 per cent.
The fact is: when you deposit there’s no taxation, there’s no tax for interest you earn. And move is to push an investor to re-invest 60 per cent more monthly pension or other benefits.
Never there has been a balanced budget between agriculture and non-agriculture sectors and also a balanced budget between rural and urban budget. 
PM-FM: Make better duo than Rao-Manmohan Singh?
The opposition leaders sounded demoralized and more on rhetoric as they too were stunned by the “balance”, Jaitley has tried. Off the record, opposition Congress and Left leaders tried to link this year’s budget to Bihar poll debacle Modi suffered and calling it a “reactionary budget”.
One can debate that. But the bitter truth remains, we Indians see government of the day to provide us with benefits and subsidies. A Mamata-led Railway ministry would have announced goodies for journalists and spouses. A Finance Minister with Lalu Prasad’s arithmetic sense would have sparked off a debate whether world economy is really on low morale these days. Thus the Modi regime also needs to continue to play the role of a ‘provider’.
Our patriotism is reduced to shouting slogans against and pro-Afzal. When it comes to making individual sacrifices, ask staff in Parliament who is the “best Speaker” they had – the name would be Somnath Chatterjee…the reason he gave out of turn promotions to all. Those days dare gone. Hence Modi Sarkar is anti-people! Isn’t it??

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