Union Budget 2018: ‘Ease of living’ and ‘ease of doing business’ have come together
A myopic and short-term view of the Union budget looks at it from the point of view of ‘what’s in it for me?’ By that, one usually means taxation. “In this world, nothing can be said to be certain, except death and taxes,” Benjamin Franklin once said. Indeed, tax rates are increasingly becoming certain. Therefore, because of the Goods and Services Tax (GST), one shouldn’t have expected changes in indirect tax rates, beyond what has been done on customs duty to promote domestic value addition. Those rooting for a reduction in corporate tax rates to 25% should have also noted the certainty. It had already been reduced for selected companies based on threshold turnover (read MSME) and that threshold has now been substantially hiked (Rs 250 crores), covering 99% of the companies that file returns. On personal income taxes, let me leave aside senior citizens, though that isn’t unimportant. Salaried taxpayers, among others, complain about high compliance costs. If there is a standard deduction without furnishing transport and medical bills, isn’t that desirable? For everyone, if there is e-assessment, isn’t that desirable too? What’s special about long-term capital gains in the equity market? Isn’t one lakh a high enough figure, and shouldn’t treatment of long-term capital gains be identical across all asset classes?
A word on fiscal consolidation. Yes, the fiscal deficit/GDP ratio was meant to be 3.2% in 2017-18. But it is important to note that the Union government’s GST revenue was for 11 months, and also that the shortfall in non-tax revenue through disinvestment targets was exceeded. More importantly, in 2018-19, fiscal deficit/GDP is projected at 3.3% and the target of reducing the Union government’s debt/GDP to 40% has also been accepted. A disinvestment target of Rs 80,000 crores is on the lower side, implying that 3.3% is achievable, especially if nominal growth picks up.
The non-myopic, medium-term view is to consider what the Union government can do to trigger structural change. First, there is the strand of ‘ease of living’, interpreted as what’s intended for individual households. Individual households don’t need doles, though poor households need subsidies. They need empowerment through inputs. Hence, Ujjwala (LPG connections), Saubhagya (electricity), Jan Aushadhi centres (medicines), toilets, housing (PM Awas Yojana ), Health Protection Scheme (leading towards universal health insurance), and life insurance. Within the ‘ease of living’ strand, what I have just listed are like individual private goods. Some are merit goods, because they warrant subsidisation. But there is also a strand of collective private goods. Therefore, especially in view of the Union government’s responsibility under the Seventh Schedule, we see a strengthening of e-NAM, upgradation of rural haats, agricultural marketing infrastructure, widening of the Gram Sadak Yojana, Bharatnet, Smart Cities, AMRUT, National Highways, Bharatmala, UDAN, railways and railway stations. Note that given fiscal consolidation targets, resources often have to be off-budget. Note also the special focus on 115 aspirational districts.
The other strand is ‘ease of doing business’. By this, one doesn’t necessarily mean the corporate sector. Indeed, for non-corporates the two hats of individual/household and enterprise often blur. Under this strand, one should list the changes in the MSP system, horticulture clusters, broadening of Kisan Credit Cards, credit for lessee cultivators, tax treatment of Farmer Producer Companies, initiatives under the education head, skill centres, MUDRA, government contribution for EPF, fixed-term employment and the National Logistics Portal. As the PM has often said, there is a conscious intention of nudging people away from seeking government jobs. Why should people always seek out jobs and employers? They should become entrepreneurs and employers and provide jobs to others. That is what Startup India and Stand-up India mean. There is no rural/urban or agriculture/non-agriculture differentiation in this intent. Rural and agriculture were always implicitly part of it. At best, the budget speech makes the inclusion of rural and agriculture explicit.
Election year, last budget of this government, populist budget — these are meaningless labels. This budget doesn’t mark any discontinuity with the policies followed by this government since 2014. By ’populist’, one presumably means profligate. This budget is anything but that. According to the dictionary, ‘populist’ is something that represents the interests of ordinary people. This budget is certainly that, which is why it won’t be popular with those rooting for substantial tax cuts.
Bibek Debroy is the chairperson of the Economic Advisory Council to the Prime Minister
The views expressed are personal