Will there be magic touch?

The first full-fledged 2015-16 is a crucial budget to be presented by the NDA government. Expectations would be to see it as a turning point in the economy and political process. It should be a signature document with many surprises. For, it has many promises to fulfill, new courses to set, create a roadmap for investment, set the process for doing easy business, ease tax structure, create jobs, most-favoured treatment for farm sector and many more.

The job is simply not easy for Finance Minister Arun Jaitley. He has to achieve the task amid the worst challenge of falling or at best stagnant revenue collection and a diffident bureaucracy.

The GDP should not be a concern. It will surge if only the prescription is right. Jaitley only needs to select the right medicines that would reduce the chasm, bring smiles and set the economy on a free flight. Only two days back, he had made the right sound while launching eBiz portal for easier business process that brings 11 Central Government services on one platform.

India ranks 142 in the World Bank index of doing business. Would the single window, which Jaitley says, help businesses to work from their homes without having to make forays to the government offices, be a success? A year ago a similar “single eWindow” launched in Madhya Pradesh has become a bottleneck. Industry chambers say that emails sent to it go unanswered. It is happening also at some Central ministries.

Jaitley or Prime Minister Narendra Modi have no path of roses. Many Centrally sponsored schemes are to be transferred to States. The social sector spending has to be shared by them. The number of schemes is to be reduced to around 30 from 66 at present. This may be a part of the government’s bid to rationalise spending, which grew by more than seven times during the UPA regime.

This would make funds available for infrastructure and core sector investments –must for “Make in India” ambition. The bazaar is also there, but western powers would not do much to except for some tokenism. They would not like to weaken their stranglehold. Would the Budget promise much more to them on the lines of nuclear liability insurance?

The Income Tax department gets Rs 1.75 lakh crore-odd revenue but almost Rs 70,000 crore is refunded every year. But with increased manpower, paper work and prosecution of the honest citizen, it spends over Rs 2 lakh crore. The additional money with the people would boost demand and help manufacturing. In reality, if the I-T department staff is pruned to one-third to manage indirect taxes, the government would have to forgo not more than Rs 50,000 crore of revenue.

However, the government would not do that. It is slated to raise the I-T slabs a bit. May be instead of Rs 20,000 a month income, one would have to pay a tax at Rs 25,000 and if the government is bolder a little more.

It is likely that railway fares would be raised and many other services, including telephony, would become dearer with the “widening” of the tax net.

Prices and the rupee should be a concern. World commodity prices are crashing. It is not happening in India. Roadmap for strengthening the rupee is essential to give the economy a boost. A weak rupee has not boosted exports since the first devaluation in 1965. Still there are dreams about this Budget. People want to see the magic wand.

By: Shivaji Sarkar