In search of common man’s budget - BY Sankaran Srinivasan
Union Home Minister P Chidambaram tried to woo Indians with his 8th Union Budget which he presented on Thursday, Feb 28. While presenting the Union Budget 2013-14, the finance minister emphasised on the need for 'inclusive growth'. According toChidambaram, it will focus on higher growth and financial inclusion.
Just like Bollywood movies and cricket, almost everyone has an opinion on Union Budget and has become a critic of it. Never before in the history of India have so many people understood the meaning of “fiscal deficit”.
We also tried to catch reactions of some of the stakeholders as to what do they feel about the Union Budget. Here are some of those reactions…
PM Manmohan Singh
"We need to create 10 million jobs a year for the duration of the 12th Plan which can be achieved only if we reach eight percent GDP growth level. Chidambaram has laid out a roadmap with regard to investments"
President Pranab Mukherjee
"I did not listen to P Chidambaram as I was feeling nostalgic".
Ram Gopal Yadav, SP leader
"There is decline in prices of imported shoes only. No relief to any class...Now 1 per cent tax has been imposed on flats too."
Gurudas Dasgupta, Communist Party of India (CPI) leader
"It is a "lollypop" offered by the government. It was a budget of deceit."
Sitaram Yechury, Communist Party of India-Marxist (CPI-M) leader
"In this budget, the way he (Chidambaram) managed is by presuming. He has presumed that taxes will grow up. These are unrealisable. In the first nine months of the last year the central excise collection fell by 16 per cent. From where is he going to get an increase in the tax revenues?"
Mayawati, BSP supremo
"There is nothing important in this budget...All announcements related to poor and Dalits look to be in air."
Mulayam Singh Yadav, SP chief
"Though the budget is not good and is anti-poor but we support it to keep communal forces away from power."
Harsimrat Kaur Badal, Shiromani Akali Dal MP
"I would give only two marks to the budget out of 10."
Shatrughan Sinha, Actor-turned-MP
"It is a lollypop budget, a trap of numbers."
Nitish Kumar, Bihar Chief Minister and JD-U leader
"Fight for special status is in its final stage. I am raising my voice for other backward states also...Money allocated for food security should be increased. Funds for Nalanda International University is a welcome step."
Balbir Punj, Senior BJP leader
"Disappointing budget...It is purely an accountant work. Primary objective of budget is to be able to ignite the economy...The size of the cake is getting smaller and smaller."
Sharad Yadav, Janata Dal-United leader
"It is a very disappointing budget. The inflation would continue and the middle class would continue to suffer. There is no relief. I think the schemes should have been consolidated."
Murli Manohar Joshi, Veteran BJP leader
"it was an accountant budget, not a finance minister's budget."
Sushma Swaraj, BJP leader
"We were expecting agriculture and infrastructure based budget, but we are disappointed. They have not given anything...The finance minister could not see the face of the farmer and common man. This was an unimaginative, dull and boring budget. The expectations were that it will bring some hope to the country it has not happened. Common man was not even mentioned in the budget."
Arun Jaitley, BJP leader
"This has very little to offer. Specially to the sectors which needed some help. First they put economy in distress then they come with some cosmetic changes. This is juglary."
Yashwant Sinha, Former finance minister
"This budget is cleverly drafted."
RPN Singh, Minister of State for Home
"Chidambaram has done a tight rope walk, but has managed well."
Shiv Sena Spokesman
"It is a pro North Indian Budget".
Home Minister Shusil Kumar Shinde
"I knew this type of budget will come but when it will come I did not know".
Arvind Kejriwaal
"I will expose the budget".
Kapil Sibal
"Just like 2G scam, it is a zero loss budget".
Congress spokesperson
"Thanks to Shri Rajeev Gandhi for the wonderful union budget".
BJP spokesperson
"We are planning to hold an internal debate between our PM candidates and will then react".
Mamta Banerje
"I demand complete rollback of Union Budget".
Rahul Gandhi
"It is a game changer".
Theek Hai ~ Prime Minister Manmohan Singh
It is a pro North Indian Budget ~ Shiv Sena spokesperson
I demand complete rollback of Union Budget ~ Mamta Banerje
I will give 4.5 stars to Union Budget ~ Taran Adarsh
It is not good for middle class. I wished P Chidambaram has seen my shopping list ~ A middle class wife
The Union Budget is a blow to Modi ~ NTDV news anchor
I don’t care; I have a boyfriend ~ a girl recently proposed by a boy on Valentine’s day.
Though the budget is not good and is anti-poor but we support it to keep communal forces away from power ~ Mulayam Singh Yadav
It is a game changer ~ Rahul Gandhi
I knew this type of budget will come but when it will come I did not know ~ Home Minister Shusil Kumar Shinde
The budget is 90% idiot ~ Justice Katju
There is nothing in Union Budget for Marathi Manoos ~ MNS spokesperson
Beautiful Budget. Kiss to Chidu ~ KRK
It is a corrupt budget. It will not help in bringing back black money ~ Baba Ramdev
I will expose the budget ~ Arvind Kejriwaal
Just like 2G scam, it is a zero loss budget ~ Kapil Sibal
Thanks to Shri Rajeev Gandhi for the wonderful union budget ~ Congress spokesperson
We are planning to hold an internal debate between our PM candidates and will then react ~ BJP spokesperson
I did not listen to P Chidambaram as I was feeling nostalgic ~ President Pranab Mukherjee
It is an anti-dalit and a Manuwadi budget ~ Mayawati
Chidambaram has disappointed the people of Bihar. budget. There is marginal increase in the backward region grant fund to the state-.Sushil Kiumar Modi Dy .Chief Minister Bihar
Budget a damp squib, full of rhetoric, says -Jayalalithaa
Fundamentals of budget are strong. In long term stock market will give good returns ~ An Indian stock market analyst
Budget 2013 is neither for people nor for growth, says Sitaram Yechuri, Polit Bureau Member, CPM
The budget is 90% idiot ~ Justice Katju
There is nothing in Union Budget for Marathi Manoos ~ MNS spokesperson
Beautiful Budget. Kiss to Chidu ~ KRK
It is a corrupt budget. It will not help in bringing back black money ~ Baba Ramdev
It is not good for middle class. I wished P Chidambaram has seen my shopping list ~ A middle class wife
The Union Budget is a blow to Modi ~ NTDV news anchor
I don't care; I have a boyfriend ~ a girl recently proposed by a boy on Valentine's day. Fundamentals of budget are strong. In long term stock market will give goo
Just as a farmer gazes into the sky each year waiting for the onset of the monsoon that would lead to a bumper harvest, the common man had a lot of expectations each time the finance minister rises from his seat to present the budget in parliament. He had the following minimum expectations
Tax Exemption
With rising inflation hitting pockets hard, raising the tax exemption limit to 300,000 rupees from 200,000 rupees would leave more disposable income in the hands of taxpayers, particularly those in the lower income bracket.
Investment Limit
The Income-Tax Act provides for a deduction of up to 100,000 rupees for certain investments/expenses such as retirement funds and insurance payments. In the absence of state-funded social security schemes, it is important for people to secure their post-retirement life. Increasing the limit to 300,000 rupees will encourage such investments. Further deductions like Section 80CCF (investing in infrastructure bonds) are also welcome as apart from encouraging savings, they also enable the government to direct the funds to priority sectors.
House Loans
Every Indian dreams of owning a house. But while property prices are soaring, the interest deduction of 150,000 rupees on self-occupied property is too low. The limits should be increased to 500,000 rupees.
Healthcare
The rising cost of medical care is hurting the common man. Raising the exemption limits for reimbursement of medical expense to 75,000 rupees from 15,000 rupees should provide some succour. The deduction limit under section 80D for health insurance premiums should also be increased to 50,000 rupees from 15,000 rupees with more and more people opting for health insurance.
Allowances
While conveyance and education expenses have surged, the exemption limits haven't kept pace. These limits should be increased in proportion to the amounts spent.
Standard Deduction
Salaried employees incur various expenses for upgrading their skill sets. But they are not allowed deduction of any expenses incurred during employment. A standard deduction up to 30 percent of salary with an upper limit of 75,000 rupees should be provided.
Esops
Employee Stock Ownership Plans (ESOPs) issued free of cost or at concessionary rates are taxed on the difference between fair market value and the amount actually paid by the employee. Levy of income tax on date of exercise creates a liability on the employee to pay tax on gains which are purely notional. Such taxation makes ESOPs less lucrative. Since ESOPs are a critical, motivational and retention tool for companies to retain talent, they should be taxable only on sale of shares.
Refunds
Revenue authorities need to ensure taxpayers get refunds and tax credit on time. This will encourage more Indians to pay tax.
Disappointment of common man
‘The way in which the finance minister began to introduce his direct tax proposals of Budget 2013 was a huge enough hint about what lay ahead.’
“Union budget 2013 was one of the most anticipated budgets in recent years because of the timing; the GDP growth has touched the nadir and we have general elections next year. It was logical to conclude that the budget would be either a highly disciplined or highly populist one. In the end, it turned to be neither. First, it is hard to imagine the fiscal deficit coming down to 4.8 per cent next year without any substantial raise in revenue receipts. A surcharge on just 42,800 super-rich (really?) cannot achieve the purpose. Second, the budget has nothing that can provide an advantage to the UPA, let alone guarantee votes for it. In the end, the country is paying the price for bad governance in recent years. “
“The proposed surcharge on the “super-rich” taxpayers is an eyewash to counter the charge that the UPA government harasses only the middle class and salaried people, and is not interested in taxing the rich. Those falling in this category must be surely more in number. The Income Tax authorities should be more vigilant in detecting the evasion by the rich. While the Finance Minister’s proposal to increase duty on high-end cars and motorcycles is welcome, his proposal to increase the duty on mobile phones priced at above Rs. 2,000 will not be liked by many, especially the youth. Most people use mobile phones which cost more than Rs.2,000 and smart phones have become the order of the day. The budget is a big disappointment to pensioners”
“
People had pinned their hopes on the budget. But Mr. Chidambaram has not addressed any major issue relating to the relief of the common man and the pathetic conditions of senior citizens. The budget will lead to a further increase in the prices of all essential commodities and services, including medical care. The inflationary trend will continue unabated. The budget may not be harsh but it is certainly not citizen friendly”.
“The budget will certainly affect the masses financially, favourably or not. This is one side of the financial implication. Apart from this, people are adversely affected by factors such as a parallel economy, corruption, black money and fake notes. We somehow think there is no way to eliminate them. Even Ministers are of the opinion that there is no magic wand to do away with corruption. Who, then, will do something to bring normality in the economic activities and fairness of outcome?”
“PC wearing the politically correct trademark spotless white dhoti and shirt said during a televised interview that stopping the purchase of gold by the Indian public for one year would help the financial situation. PC also said that “except for gold, all are imports are essential for India”. Could the politically correct PC explain to the Aam Aadmi, who is struggling to survive with all the price hikes of essential commodities, how the purchase of “essential” imported WMD and exorbitant AWACS (through a rogue Middle East regime) for several billions of dollars will essentially help the Indian economy? Will the AWAC plane, that costs a fortune to keep in flight but one that can literally spot a small coin from high up in the clouds, be used to locate the missing bullion (of kickbacks and commissions paid to Indian intermediaries) in deep underground Swiss bank vaults?”
‘There is no relief for the common man. If our FM can actually go on the streets and show us where the prices have reduced I would be grateful in fact the entire nation would be grateful. These days even the written word has many meanings. It is all on face value that you can trust and understand.’
‘This in not merely an economic but a "Political Doom " as well - The same happened with the USSR - One of the many reasons for the collapse of the Soviet Union was the overall failure of the "command economy". Unlike the "market economy" where prices of goods and services are set by the forces or supply and demand based on the purchasing decisions of consumers, prices in a command economy are set centrally and resources are allocated based on government priorities.Today the UPA Congress Govt's priority to somehow make the 2014 Elections even though they have lost face with the masses, they are not interested in the upliftment of the common man , PC Chidambram is a " Anti People Policy Person " hence they are not interested in genuinely building India's Infrastructure , or creating JOBS for the young as they are only interested in " Making More Money " for their own needs. Just imagine that a country like Syria got 100Crore Aid from Prathiba Patil the then President of India and Syria is the most Anti-People Government in the World today ! Prior to the collapse of the Soviet Union its Government had introduced measures same as adopted by India today which were intended to invigorate the Soviet economy by increasing the free flow of goods and information and by loosening social restraints , instead it brought about the disintegration of the USSR . The UPA Govt is forcing India into it NOW!’
‘Mr. PC, Rating agencies are rating for people and not for cheap vote bank and to make alliances.. Try to respect rating agencies that are employed with top class statistical institutes and watching your cheap moves... Answer why Bihar get special funds which other poor north east states are not getting??’
‘unlike china which produced common,mundane, day to day items for the entire world and made money for china and its people, this govt in india/parliament is devoid of thinking faculties,ideas,initiatives,
‘No Mr. FM. You are incorrect. When you do a budget, everybody is a stakeholder. Just like a CEO's responsibility is to ensure the success of his company through profit margins and take a huge pay packet, while at the same time ensuring internal employees are happy, and the taxes are paid in accordance with the law of the land and also ensuring that customers using his company's product and services are happy too. That is why you have a KRA sheet. It is not a one liner. Similarly, when you are a FM, there is no one stakeholder. There are multiple stakeholders. Even the armed forces are a stakeholder (you might say that is the job of Def chief - but that's incorrect as a budget impacts everybody). Just like a CEOs' signature impacts a company, similarly, the budget of the country has manifold impacts. Don't give a kiddish comment that you do for one set of stakeholders. You don't. (OH YES, it is a diff topic that your current budget didn't have anything for anybody - not even for the people of India. You could have made wonders, irrespective of the party you belong to. You lost that opportunity.’
‘there is nothing in the budget to take the country forward,except consolidation of what ever was existing.long term plans/projects are conspicuously absent.Budget to buy time to tide over the elections, wooing voters . on the other side of elections,a flurry of amendments will ensue,if they persist in power.The least they could have done was to start drinking water projects/not bottled water,linking north and south rivers to divert floods,and reduce dependence on seasonal rains.10 year all manual projects to create jobs.’
‘Budget 2013: I make budget for people of India, not for a rating agency, says P Chidambaram I think Mr. FM is correct we do for the people it is appreciated by 100% but 2013 budget saying preliminary stage or stationer stage for the development of the people why is that due to lack of parallel economy , that is required root 1 policy with minimum 2 % exempted at every economic department’
‘Will Chidambram let us know who are those people of India for whom he made this budget? I suppose they are not resident in Ital’
‘The correct person to head the finance ministry is the present RBI Governor who was finance secretary. He has good grasp of the indian economy and aware of all the muddles, scams etc., created by the political interference and by crony capitalism which is the very foundation of our UPA. If MMS is an honest orchestrator in adminisration and finance, he should have whipped the erring ministers who are responsible for the drag that we are drawn to. Further the ministers never cared for the instructions of MMS since they were taking dictations from sonia gandhi and her ronies. If only he once exploded the constraints imposed on him the Midas of corruption, public would have appreciated his spirit of integrity in navigating the country in correct course. The budget exercise of chidambaram is purely make believe economic gimmicks taking the country to a deeper depth of economic and administrative chaos.’
‘Budgets are made for the people of the country & not for rating agencies. But this budget neither gone well with people nor with investment community and not the least the rating agencies. nothing has been done to suggest that there will be fiscal discipline to contain the deficit nor there is any concrete step announced to boost exports to contain CAD. What we require now is reduction in government spending on non productive schemes & at the same time take steps to boost exports without hurting local demand which otherwise fuel inflation. Mr. Chidambaram, these are the CORE ISSUES YOU NEED TO ADDRESS. Might be you are afraid of announcing them in budget & but we expect some administrative measures to contain widening gap in CAD & fiscal expenses’.
Feeling confused we tried to understand budget, fiscal deficit and expectations from a progressive economist
Budget time is very significant for an economy. It gives an opportunity to take stock of how the economy fared during the previous year and setting targets for the coming year. These targets are fixed on the basis of expectations or assump-tions of certain variables. The proficiency of the government is reflected on how accurately it makes the expectations of these variables. More often than not, the government is tempted to give a very rosy picture about the coming fiscal year by presenting the Budget basing on unrealistic expectations about the functioning of the economy. However, with the passage of the year, these unrealistic expectations stand exposed and they inflict an irreparable damage on the credibility of the government. This, in turn, has a great negative influence on the expectations of the investors about the functio-ning of the economy thereby discouraging them to invest in the economy. Nothing can explain this better than the Budgets of the last two fiscal years. For example, not a single target fixed in the last Budget (2012-13), be it fiscal deficit as a ratio to GDP revenue collection as ratio to GDP or absolute etc., came true. This was simply because all these targets were set on the expectation of a highly unrealistic growth rate (over eight per cent), whereas the economy is recording merely five per cent growth rate this fiscal as per the recent estimation of the CSO. This implies that the government cannot revive the investment activities by just painting a rosy picture of the economy through the presentation of a Budget based on unrealistic assumptions. One cannot befool the investors in a market economy. They have their own methods to make assessments about the variables that are significant for investments. The most significant variables in the Budget for the investors are the corporate tax structure, indirect taxations and fiscal deficit target. The corporate and indirect taxes are not a source of worry for the investors because they are almost stable or would change on expected lines. What worries most to investors is the fiscal target. The new Finance Minister has prepared the roadmap for fiscal consolidation by the year 2015 and taken many measures in that direction by increasing the prices of petroleum products (including diesel), capping the LPG cylinder, enhancing rail fares etc. However, these are very small steps in comparison with the mammoth task ahead. Although the Finance Ministry is betting on its plan to well-target the various subsidies through the UID card, its implemen-tation has yet to overcome many technical and administrative glitches. The impending national Food Security Bill is another programme which is capable of offsetting all the gains coming from the UID card scheme. It will be more problematic especially in the face of the election UPA II has to face in the year 2014.
The fiscal deficit has two roles to play in an economy. First, it has a short-term role to fuel the demand in the economy. Second, in the long run, it might hamper the growth by discouraging private investments through an adverse impact on the expectations of the investors about one significant economic variable for investment—real interest rate, besides the crowding-out effect. It is especially good if the economy is operating below the potential level of the GDP. This was the prescription given by Keynes during the Great Depression in the 1930s. How-ever, once the economy is hitting the potential level of the GDP, there is a chance of overheating of the economy. That would start the inflationary spiral in the economy by triggering expectations of the economic agents.
In fact, after reaching close to the potential GDP, the difficult task for the government is to roll back the counter-cyclical measures initiated at the time of slowdown of the economy. This requires a lot of political guts. Often, at this juncture, the monetary tools are used frequently to contain the inflationary pressures. This has happened in India in the recent past as well. It delays the revival of the economy on its natural path. In fact, the economy starts slowing down again in the absence of the investment activities owing to the high interest rates and high inflation. It also works to adversely influence the expectations of the investors about the real interest rate in the future.
Recently the author conducted the adaptive expectation econometric analysis with regressing industrial production index on the real interest rate and fiscal deficit. The quarterly data on the Indian economy after the year 1991, a watershed year in the economic history of India, was used for the purpose. It was found that expectations work in the case of the entrepreneurs’ decisions for investments to the real interest rate in India. The fiscal deficit, when used in the model, bears a negative sign. However, when it is used in a simple model, it has a positive sign. It might be that when the investors make expectations about the economic variable (real interest rate) in future, they take into account the level of fiscal deficit also into consideration. This has a negative impact on investment activities, especially by private players, even in the short run. This could be because a high fiscal deficit leaves little policy space for the monetary policy to reduce the interest rate in the economy.
Our conclusion:
Union Budget 2013: all smoke and mirrors
This Budget has been prepared to please investors, not to fuel growth, employment and incomes. P Chidambaram’s Union Budget for 2013-14 has been criticised for being “dull” and “prosaic”. Budget 2013 became a victim of both wild expectations from the market and the usual media marketing frenzy centred around this annual ritual. It is just as well that Budget 2013 ended up being dull by the standards of the capital market rather than outlandish, like the so-called “dream budget” of 1997-98 which the union finance minister presented in his earlier avatar as a member of the short-lived United Front government and whose consequences we are still paying for. The framing of Budget 2013 may have been constrained by the approaching elections to the Lok Sabha but the finance minister has on paper achieved what he wanted to do: maintain the fiscal deficit at a level that would please foreign investors and international credit rating agencies. By the end of budget day, two rating agencies had given their stamp of approval. But are the budgeted numbers for real? And, what of growth, employment and incomes?
In the weeks and months in the run-up to Budget 2013 it was clear that the United Progressive Alliance government was desperate to signal to the international capital market that it would do what was needed to maintain a large inflow of foreign capital that would cover a burgeoning current account deficit and boost domestic investment. Hence the moves to dilute the General Anti-Avoidance Rules, the road shows of the finance minister to the global capitals of finance and the repeated statements of action about the fiscal deficit. Budget 2013 shows how far the finance minister was willing to go in this regard.
Despite a slowdown in revenue growth, the fiscal deficit for 2012-13 has been maintained at 5.2% (revised estimates or RE) of the gross domestic product (GDP), more or less the same as the budget estimates (BE) number. How? By brutally slashing Plan and capital expenditure. Total Plan expenditure in the fiscal year that is to end on 31 March is Rs 90,000 crore less than the budgeted amount. Both revenue and capital expenditure have felt the axe and no sector has been spared. Agriculture, rural development, energy, transport, social services – you name it and the finance minister has cut off funds. Total capital expenditure according to the 2012-13 RE is as much as 18% less than budgeted, and central assistance to state Plans is also 14% less than budgeted. Is it any surprise then that growth in 2012-13 slowed so much?
With private investment already sagging, the huge cutbacks on central Plan expenditure were bound to have a negative impact on the fortunes of the economy. Fiscal deficit reduction is to continue further in 2013-14 to 4.8% of GDP and yet the finance minister says he will boost Plan expenditure in the next financial year. How is that possible? By banking on a major spurt in tax buoyancy and making unrealistic projections of a quantum jump in non-tax receipts. Gross tax revenue in 2012-13 may be 15% less than budgeted, but the projections for 2013-14 are of a 19% increase over the 2012-13 RE. Nominal GDP growth in 2013-14 has been projected at 12-13% but tax revenue is to grow even faster. Even more unrealistic is the huge 33% jump expected in non-tax receipts; Budget 2013 expects Rs 21,000 crore more from communication services (i e, sale of spectrum) and as much as Rs 18,000 crore from dividend payouts (from a shrinking public sector and a central bank whose foreign exchange holdings are declining). If these numbers on the revenue side do not materialise will we then see yet another round of ruthless cutbacks in Plan expenditure, capital outlays and Plan transfers to states, all in pursuit of the holy grail of a reduction of the fiscal deficit? If that were to happen and if private investment does not revive, we are slated for a continuation of slow growth and not the acceleration that the finance minister hopes for.
After months of a manufactured debate on higher taxation of the rich, what we do have is a whimper of a surcharge on individuals with an annual taxable income of more than Rs 1 crore and on domestic and foreign companies with taxable incomes above a certain limit. This is no more than half a nod in the direction of addressing the major inequalities in personal wealth that have emerged, especially in the past decade. Just in case these minor levies upset the “super rich” too much, the finance minister has made it clear that they are to be one-time, one-year levies. In the meanwhile, the edifice of personal direct taxes that has been built on the basis of discrimination in favour of property income (no taxation of dividends, no long-term capital gains taxation of share transactions, and no inheritance tax) remains in place. One cannot quarrel with the other tax proposal for imposition of a commodity transaction tax on futures contracts involving non-agricultural commodities, though one can expect the affected exchanges to pull out all stops to roll it back as they successfully did on a similar tax a few years ago.
With so much energy having been expended on the fiscal deficit reduction strategy, there was little left for measures to boost private investment and savings. Budget 2013 continues with the tradition of presenting numbers that have no value other than what a short-sighted capital market wants to read into them. It is perhaps more than time to downgrade the importance accorded to this annual number-crunching exercise. No other large country, developing or developed, gives so much attention to the presentation of a budget, which in India’s case is all smoke and mirrors.
Search of common man ‘s budget continues …
CONSOLIDATION OF DECEPTION C/F TO BUDGET 2014 …….
No comments:
Post a Comment