[dropcap]T[/dropcap]he Union Budget 2016-17 presented by Union Finance Minister Arun Jaitley in Parliament today is being analysed here in a tabular form for the ease of doing reading. Contents of the right column hereunder does not correspond to the left, neither does vice versa apply unless so specified in a given row. While there are apparently several negatives in this list, if one were to weigh the impacts of individual measures, the positives are not only greater in quantity but also more fruitful in terms of quality.
The parts appearing in normal font as under are taken from the copies of Finance Minister Arun Jaitley’s speech. The parts that are italicised are my corresponding comments.
What will work
What will not work
|The Plan and non-Plan classification will be done away with from fiscal 2017-18, as successive committees, Jaitley said, have questioned the merit in having this classification of government expenditure. A broad understanding over the years has been that Plan expenditures are good and non-Plan expenditures are bad, resulting in skewed allocations in the Budget. This needs to be corrected to give greater focus to revenue and capital classification of government expenditure. The Finance Ministry will closely work with State Finance Departments to align Centre and State Budgets in this matter.
The movement of money has not quite been under the control of a government in any part of the world. Yet, socialist thinkers and governments that dominated the last century never shied away from playing God. As a result, an Indian government, for example, ‘planned’ everything every corner of the country was supposed to do. These were projects sanctioned by the Centre; the money to be spent on these was called Plan expenditure. That spent on regular functions of the state was non-Plan. While Jaitley said that the latter was bad according to different committees, it can’t be helped. You have to spend on routine functioning as well as eventualities. In particularly the second, they used to come with riders under the Planning Commission. With the replacement of this commission with NITI Aayog, 42% of revenue now going to the States, Centre’s share of taxes reduced from 68% to 58% and a largely federal structure wherein local bodies can decide on the spot what work they should divert money to, it is better to do away with the Plan/non-Plan classification.
Plan allocations’ special emphasis on agriculture, irrigation, social sector including health, women and child development, welfare of Scheduled Castes and Scheduled Tribes, minorities, infrastructure, etc is welcome.
|The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act is to be amended to strengthen asset reconstruction companies. This will help, the government believes, in dealing with stressed assets of banks. In the plan for revamping of public sector banks (PSBs), the announcements are:
a. allocation of Rs 25,000 crore towards recapitalisation of PSBs;
b. roadmap to be spelt out for consolidation of PSBs;
c. considering reduction of Government equity in IDBI Bank to 49% of below;
d. Debt Recovery Tribunals (DRTs) to be strengthened with computerised processing of court cases.Using taxpayers’ money to compensate for the bad loans that were given under political pressure or due to corruption of bank officials is ill-advised. A law is needed to immunise banks’ decision-making bodies from political pressure until all banks are turned private.As for the loans that were given to extract favours from the loan seekers, let the banks that are in trouble due to NPAs suffer because of poor organisational discipline and non-compliance with ethics; let them shut down for all we care after returning to ethical depositors their money; we will still be left with enough good banks that will cater for our needs.
|The fiscal deficit in RE 2015-16 and BE 2016-17 have been retained at 3.9% and 3.5% of GDP respectively.
This target was dismissed as “ambitious” and “unreasonable” last year. But the economy has done well to keep the objective achievable. As the Narendra Modi government stops being Keynesian and realises that spending by the state has its limits in boosting the economy, its expenditure will reduce, as more and more projects are done by private players whereas the government just reduces to being a facilitator cum regulator. The deficit can then reduce to some extent.
At this phase of reforms, Modi is trying to empower the poor. Once a critical mass of people with purchasing power is created, even welfare schemes will need less spending. That will bring the deficit down further.
Finally, the tax net must be widened and income tax reduced drastically, if not phased out. It is here that Jaitley disappoints the most. If the revenue had increased this way, we could have hailed the finance minister unconditionally.
|FCI will undertake online procurement of food grains. This will bring transparency and convenience to farmers through prior registration and monitoring of procurement.
But FCI has a terrible warehousing problem. The issue of storage of food grains remains unaddressed.
|Farmer’s income to be doubled by 2022; 28.5 lakh ha will be brought under irrigation under Pradhan Mantri Krishi Sinchai Yojana; 89 irrigation projects, requiring Rs 86,500 crore in next 5 years, to be fast tracked (23 of these projects to be completed before 31 March 2017); dedicated, long-term irrigation fund will be created in NABARD with initial corpus of Rs 20,000 crore; total outlay on irrigation including market borrowings is Rs 12,157 crore; major programme for sustainable ground water management proposed for multilateral funding at a cost of Rs 6,000 crore; Rs 27,000 crore including States’ share to be spent on PMGSY in 2016-17; Rs 9 lakh crore will be given as agricultural credit in 2016-17; 300 ‘rurban’ (portmanteau of rural + urban) clusters will incubate growth Centres in Rural Area…
We free-market advocates may want the private sector in everything, but make no mistake about it. A businessman does not come running in to put his money on a socially or even economically relevant project unless there is some precedence that serves as an assurance that such investment wouldn’t go down the drain. It can only be government that can set such precedents. The investments above will be a massive job generator in villages and small towns not only via existing employment avenues but also in hitherto uncharted territories. This is besides making the basic tools and amenities reach the needy — water for a farmer is an essential tool; for others it is an amenity — which the private sector does not take the initiative to ensure.
|Rs 2.87 lakh crore will be given as grant-in-aid to gram panchayats and municipalities as per the recommendations of the 14th Finance Commission. This translates to Rs 81 lakh per gram panchayat and over Rs 21 crore per municipality.
The grant to municipalities will be lost to a great extent in corrupt acts of officials and inefficient administration of the local bodies. While panchayats are not reported to be clean either, the bigger problem in villages is caste-based discrimination and quid pro quo-type of favouritism. A better idea would be to make panchayats self-sustaining, where they generate the money they need. In the case of municipalities, they should be much smaller, comprising a ward each to begin with and then breaking it down further to one neighbourhood each. Let every neighbourhood raise money for its own upkeep and grab the local official for non-performance, if any. A city is too unwieldy for a central civic body to manage.
|Pradhan Mantri Fasal Bima Yojana (PMFBY) will help to protect the farmers from the natural disasters.
For long, we have demanded this in lieu of the populist loan waivers that wreck the economy. The government must be hailed for caring for the money as much as the farmer.
|Rs 9 lakh crore will be given as agricultural credit in 2016-17.
We are keeping it under the list of negatives only for the propensity of all governments to waive off loans. It will be a better idea to create an environment conducive to opening up private banks and NBFCs in the rural sector and give Shylock-like local moneylenders a run for their money.
|Soil health cards will be given to 14 crore farm holdings by March 2017.
It has worked wonderfully in Gujarat. In this aspect, the rest of India is no different. In fact, naturally fertile parts of the country should do better than a semi-arid Gujarat. A farmer’s annual or biennial planning depends on his knowledge of the quality of the land he cultivates. This knowledge must be standardised. The soil health card is the solution.
|The Price Stabilisation Fund has been provided with a corpus of Rs 900 crore to support market interventions.
No political party that is socialist — the BJP is no exception — can curb prices of market commodities. Government intervention does not work for the simple reason that operators in the market are beyond state control. Saying that prices increase because of hoarding is anachronistic, a throwback to the Indira Gandhi years. The only way prices can stay stable is ensuring that there is no dearth of vendors for the consumers to choose from.
|2,000 model retail outlets of fertilizer companies with soil and seed testing facilities will be opened in the next 3 years.
Take note of the fact that this is private participation. Further, it makes the agricultural produce market more scientific. It will also be a job generator.
|Surcharge increased from 12% to 15% on persons with income above Rs 1 crore; rate of securities transaction tax in case of ‘options’ increased from 0.017% to 0.05%.
The idea of taxing the rich will be a dampener not just for wealth accumulators but also for wealth generators. Chartered accountants will have a field day projecting incomes of their clients as less than Rs 1 crore. Tax evasion will masquerade as non-applicability of tax!
|A unified agricultural marketing e-platform to be dedicated to the Nation on the Birthday of Ambedkar on 14 April.
Recall that FDI in retail was vehemently opposed by vested interests led by traders of a caste that is believed to be the then chief opposition party’s core voter base; the party is now the leading ruling party at the Centre. What would the big foreign retailers have done if allowed to operate on this soil? They would have reduced the length of the producer-to-consumer chain. While that would have been good, this is even better when all farmers access it, bypassing the APMC Act that many States have done away with anyway. This is creation of a farmers’ market, bypassing middlemen who were neither giving the farmers their dues nor letting the goods reach consumers at affordable prices.
|A person making payment to a non-resident, who does not have a permanent establishment, exceeding in aggregate Rs 1 lakh in a year, as consideration for online advertisement, will withhold tax at 6% of gross amount paid, as equalization levy. This levy will apply only on B2B transactions.
This provision is supposed to tap tax on income accruing to foreign e-commerce companies from India. It seems to have been done under pressure from local traders’ lobbies. One hopes it does not stymie competition in the market and reduce the newfound choices that the consumers were enjoying for the past few years.
|Small and medium shops to be permitted to remain open all 7 days a week on voluntary basis, with the right of their employees to have a week day off and enjoy other holidays protected.
This is a transformational step. Given a choice, most businessmen would like their shops to stay open 24×7. Now the law will not stop them from doing so. This translates to an increased volume of business across markets.
At the same time, it creates no labour issues, as workers cannot be forced to work more than 8 hours a day for 6 days a week. This means the shops have to employ workers in shifts. This is, thus, also an employment-generating proposition.
|Ceiling of tax rebate under Section 87A of IT Act to be raised to Rs 5,000 from Rs 2,000 for individuals with income less than Rs 5 lakh.
This is pittance! Jaitley has been persistently passing off such tinkering as relief to the middle class through the past 3 presentations — 1 vote of accounts and 2 full-fledged Budgets. He is perhaps confusing the middle class with the poor.
The middle class, the BJP’s distinct constituency, demands a treatment distinct from that addressed to the poor.
|All villages will be electrified by 1 May 2018; a new digital literacy mission scheme will be launched for rural India to cover around 6 crore households in next 3 years; modernisation of land records through revamped national land records programme; National Dialysis Services Programme: tax exemptions for certain dialysis equipments; …
These are duties of the government; no other entity will do such work.
|62 new Navaodaya Vidyalayas to be opened in remaining uncovered districts in next 2 years; an enabling regulatory architecture will be provided to 10 public and 10 private institutions to emerge as world class teaching and research institutions; a higher education financing agency will be set up with an initial capital base of Rs 1,000 crore.
India’s education system cannot be revived till the time it is extremely difficult for brilliant but monetarily humble educationists to set up schools and universities. The regulations are so strict and capital-intensive that only the super-rich can launch these institutions. That is why while government schools have a restricted reach, private schools are expensive; and the quality of education in both is far below the international standard.
Second, primary education is a basic right of all children whereas higher education is opted by a small percentage of the teen and adult population. Government funding has only ensured that these institutions attract freeloaders who come to the centres of higher education with their communist baggage and agenda, and they disrespect the money taxpayers’ pay for their education as well as lodging. The Modi government is advised to move this money to primary education.
At the same time, UGC and AICTE regulations must be eased off so that private universities can keep pace with the ever-going experimentations in education worldwide.
However, certification must be left to the government. At regular intervals, let government conduct exams; whoever is ready can appear for these. If the performance of some schools and universities is consistently below par, they will lose out in competition; students will stop enrolling there.
|Mission to provide LPG connection to poor households will be launched; 1.5 crore poor households will benefit in 2016-17. Scheme will continue for 2 more years to cover a total of 5 crore BPL households. LPG connection to be given in the name of the woman member of the family.
This government programme was not only a much-needed initiative, but also a vote-catching proposition. The “give up” campaign witnessed tremendous voluntary relinquishment of subsidised cylinders and the switch of BPL families from charcoal-to-gas cooking is well on track.
|Inter-linking State Employment Exchanges with National Career Service Platform.
This idea is archaic. With the public sector shrinking, all the employment exchanges have turned ineffective; when most jobs were government jobs, even then there were not enough jobs to disburse. Only such people who are not tuned in to the reality of the job sector still approach these centres with a faint hope of getting calls from them.
|3,000 stores under Prime Minister’s Jan Aushadhi Yojana will be opened.
This is to address the apprehension raised in some quarters after price restrictions were lifted from some essential drugs (which do have cheaper substitutes). By the way, the National Pharmaceutical Pricing Authority regularly issues lists of affordable alternatives to expensive drugs. How many of you access it? You must. Even in the existing medicine stores, you have several options for the treatment of every disease.
|Bankruptcy law proposed.
One doubts the opposition will let any Bill pass in Parliament.
|A new ecosystem for SC/ST entrepreneurs: SC/ST hub to be set up under MSME Ministry
Indian businesses tend to work as a cartel where certain caste groups may be let in as low-waged employees, but never as competitors. Milind Kamble, as a businessman, set to change this order some years ago; his chamber of commerce is being promoted intellectually by Chandrabhan Prasad. Such efforts, though not in as much organised a manner, are happening across the country. They must be encouraged. The government may also mull over OBC capitalism, much as nobody has coined this term so far. Dalits and OBCs who can never access the reserved seats are not only upset about the state policy not working for them, but they are also not always looking for government jobs. Many of them would rather need support in their respective entrepreneurship drives. Indeed, a free-er market would work more for them than the established businesses.
|A digital depository will be set up for educational certificates, mark-sheets, awards etc.
A sure-shot way to end fraudulence in claims made about one’s educational qualifications.
|1,500 multi-skill training institutes will be set up under Pradhan Mantri Kaushal Vikas Yojana; a National Board for Skill Development Certification will be set up in partnership with industry and academia; entrepreneurship education and training will be provided in 2,200 colleges, 300 schools, 500 govt. it is and 50 vocational training centres through open online courses.
This is another field of work where the private sector could have contributed on its own, but it showed no interest whatsoever in it. The various commercial colleges that run in towns and cities have been producing semi-skilled or substandard labour. This measure of the government will work if the skill training centres enjoy the kind of autonomy that IIMs do.
|Rs 2,18,000 crore will be spent on capital expenditure of roads and railways in 2016-17 (including Rs 27,000 crore on PMGSY, Rs 55,000 crore on road transport and highways, Rs 15,000 crore on NHAI bonds and Rs 1,21,000 crore on railways).
This, besides being a huge employment generator in the rural and semi-urban segments, will also provide legitimate avenues to MGNREGA.
|100% deduction of profits for 3 out of 5 years for start-ups, during April, 2016 to March 2019, with certain riders.
Criticism of the kind that the bureaucracy cannot trigger a start-up notwithstanding, this has caught the imagination of the marginalised sections of urban society and traditional as well as hereditary businesses in the rural areas. Small and medium scale entrepreneurs are upbeat about it.
|In addition to the dividend distribution tax (DDT) paid by companies, tax at the rate of 10% of gross amount of dividend will be payable by the recipients (individuals, HUFs and firms) receiving dividend in excess of Rs 10 lakh per annum.
Uniform application of the DDT to all investors indeed distorts the fairness and progressive nature of taxes, as Jaitley pointed out. This is a fairer game.
|Changes in customs and excise duty rates on certain inputs, raw materials, intermediaries, components and certain other goods.
It will boost the sectors of Information Technology hardware, capital goods, defence production, textiles, mineral fuels and mineral oils, chemicals and petrochemicals, paper, paperboard & newsprint, Maintenance repair and overhauling of aircraft and ship repair, etc.
Jaitley has rightly said that customs and excise duty structure plays an important role in incentivizing domestic value addition towards Make in India campaign.
|A taxpayer who has an appeal pending as of today before the Commissioner (Appeals) can settle his case by paying the disputed tax and interest up to the date of assessment;
No penalty in respect of Income-tax cases with disputed tax up to Rs 10 lakh will be levied;
Cases with disputed tax exceeding Rs 10 lakh will be subjected to only 25% of the minimum of the imposable penalty for both direct and indirect taxes;
Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty;
Certain categories of persons including those who are charged with criminal offences under specific Acts are proposed to be barred from availing this scheme.Tax-related litigations, appeals, tribunals etc will reduce significantly.
|A Public Utility (Resolution of Disputes) Bill will be introduced;
Guidelines for renegotiation of PPP agreements will be issued without compromising on transparency;
New credit rating system for infrastructure projects will also be introduced;
Reforms in FDI policy in areas of insurance and pensions, asset reconstruction companies and stock exchanges have been proposed;
100% FDI is to be allowed through FIPB route in marking of food products produced and manufactured in India.This will promote private participation in infrastructure projects.It will benefit farmers, give impetus to food processing industry and create vast employment opportunities. If any private party, domestic or foreign, is ready to take care of banks’ NPAs, we have no problem.
|100% deduction of profits for 3 out of 5 years for start-ups;
Withdrawal up to 40% of the corpus to be tax-free at the time of retirement;
Annuity services provided by the National Pension Scheme (NPS) and Services provided by EPFO to employees exempted from service tax;
Service tax on single premium annuity (insurance) policies reduced from 3.5% to 1.4% of the premium paid in certain cases;
Deduction of additional interest of Rs 50,000 per annum for first-time home buyers;
New dispute resolution scheme to be introduced;
13 cesses levied by various ministries having revenue collection less than Rs 50 crore to be abolished;
E-Sahyog and e-assessment to be expanded further;
100% deductions for profits to an undertaking in housing project for flats up to 30 sq m;
Limit of deduction of house rent paid under section 80GG has also been raised to Rs 60,000 from the existing Rs 24,000 per annum to give relief to employees who live in rented houses.These measures make it a typical middle class’ Budget. After addressing the needs of the poor, the Modi government is waking up to the concerns of the middle income group. Appreciated!
|A Bill shall be introduced in this Budget Session to amend the Companies Act, 2013; it aims at improving the enabling environment for start-ups;
Registration of companies will be done in one day.This will remove the difficulties and impediments in business. This is an employment generators’ Budget as much as it is of the job seekers.
|Oil and gas discovery and exploration of gas in difficult areas will be incentivized with calibrated marketing freedom.
Without this freedom, exploration is a risky business that companies wouldn’t like to get into.
|Mobilisation of additional finances to the extent of Rs 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority through raising of bonds during 2016-17 permitted.
Not depending on taxpayers’ money alone for infrastructure development is a welcome sign. These areas have a good potential of raising money. The named authorities must grab the opportunity.
|Allocation of initial sums of Rs 100 crore each allocated for celebrating birth centenary of Pt Deen Dayal Upadhyay and 350th birth anniversary of Guru Gobind Singh.
This is playing to the gallery. Messages of the great thought and action leaders above must, of course, reach the masses. But a government’s effort to ensure it has never worked, except in the case of Jawaharlal Nehru who has been excessively eulogised in children’s textbooks of social science. It will be a better idea to leave the promotion of ideals of the gurus to their respective followers, in their capacity as private citizens of the country.
Take the example of BR Ambedkar. A host of programmes will be launched on his birth anniversary. That is symbolic, necessary for social messaging, but not hollow. If the government had instead said it would build huge statues of Babasaheb across the country, it would have been a vacuous measure.
The grey areas
|A limited period compliance window for domestic taxpayers to declare undisclosed income or income represented in the form of any asset and clear up their past tax transgressions: tax at 30% + surcharge at 7.5% + penalty at 7.5% = 45% of the undisclosed income.
No scrutiny or enquiry under the Income Tax Act and Wealth Tax Act and those who voluntarily declare dues of this kind will have immunity from prosecution. Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to certain conditions.
The surcharge levied at 7.5% of undisclosed income will be called ‘Krishi Kalyan surcharge’ which will be used for agriculture and rural economy. Government of India plan to open the window under this Income Disclosure Scheme from 1st June to 30th September, 2016 with an option to pay amount due within two months of declaration.This is VDIS revisited. All past instances of the VDIS have reaped good results. The idea to fund agriculture with this money is well-intentioned. However, … (refer to the corresponding column against this row)
|First, those owing huge amounts of tax will not disclose their real incomes. They know various ways of doing it, including corrupting the tax officers.
Second, it is a constant reminder to law-abiding citizens that they can evade taxes at the moment; there will come a time in the future when they can pay a much smaller lump sum and get away with their past acts of tax evasion.
Third, at the end of the two-month exercise, the I-T department might unleash a ‘raid raj’! Amounts recovered from such raids will enrich the department less and fill the pockets of the raiders more.
|New law for targeted delivery of financial and other subsidies using the Aadhaar framework; DBT in fertilizer will be launched on a pilot basis; Of the total 5.35 lakh fair price shops in the country, 3 lakh shops to be automated by March 2017.
Targeting of subsidies is welcome. A law is perhaps needed to prevent future governments from indulging in populist indiscipline. It is equally praiseworthy that Jaitley has said that the Aadhaar card does not translate to citizenship, but… (refer to the corresponding right column against this row)
|It is weird that this country would offer public distribution service facility to people whose citizenship is doubtful. Having said that, the issue of infiltration and its implications on the demographics are better solved by the Governments of West Bengal (from where Bangladeshis infiltrate), Delhi, Karnataka and Maharashtra (where finally the Bangladeshis settle down). Given the kind of politics they practise, Mamata Banerjee, Arvind Kejriwal and Siddaramaiah will surely not launch a crackdown on illegal squatters in the country. Can we expect it from Devendra Fadnavis?|
|The corporate income tax rate for the next financial year of relatively small enterprises — companies with turnover not exceeding Rs 5 crores (in the financial year ending March 2015) is proposed to be lowered to 29% plus surcharge and cess. The new manufacturing companies which are incorporated on or after 1.3.2016 are proposed to be given an option to be taxed at 25% plus surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation.
A plan for phasing out various exemptions as the corporate tax is proposed to be reduced from 30% to 25 % over a period:
This is simplification of the tax regime for smaller businesses. The second proposal will reduce multiplicity of taxes, associated cascading and the cost of collection. However, … (refer to the corresponding right column against this row)
|The biggest roadblock in the path of ease of doing business and reducing the cost of doing business is not the Centre, but the State government — especially civic authorities. Municipal extortionists are a menace for every start-up as well as established business. People, in particular the business community, must pressure the local administrations to rein in these corrupt officials.|
|Collection of tax at source at the rate of 1% on purchase of luxury cars exceeding value of Rs 10 lakh and purchase of goods and services in cash exceeding Rs 2 lakh.
This is doable as well as desirable. Those subjected to this tax can afford to pay it. However, … (refer to the corresponding right column against this row)
|Given the new definition of the expanding middle class, a luxury car should have been defined as one that costs more than Rs 15 lakh.|
|Student unrest in the Jawaharlal Nehru University, Hyderabad Central University, Jadavpur University etc, points towards alienation of the youth from the nation. The biggest contributor to their oft-unfounded grievances is their mental conditioning by various State secondary education boards. The ‘Ek Bharat Shrestha Bharat’ programme must rather build a pool of patriotic citizens of the future by pumping resources into the central boards that are active in such parts of the country where most rabble rousers hail from.||‘Ek Bharat Shrestha Bharat’ programme will be launched to link States and districts in an annual programme that connects people though exchanges in areas of language, trade, culture, travel and tourism.
In the second half of the 1980s, Rajiv Gandhi had launched “Apna Utsav”. Whether it could achieve the objective of national integration is doubtful. What it did accomplish was boring the viewers of Doordarshan — the only television channel available then — to death. However, … (refer to the corresponding left column against this row).
Achievements listed by Finance Minister Arun Jaitley:
- Growth of GDP has accelerated to 7.6% despite
- global growth slowing down from 3.4% in 2014 to 3.1% in 2015
- global exports shrinking by 4.4%;
- this being compared to 7.7% growth in the world exports during the last 3 years of the UPA government.
- “inheriting an economy of low growth, high inflation and zero investor confidence in (the previous) government ‘s capability to govern”.
- Praise of the Indian economy by the IMF and World Economic Forum.
- CPI inflation 9.4% during the last 3 years of the UPA government; it is 5.4% under the NDA regime despite
- a monsoon shortfall of 13% for 2 consecutive years.
- The current account deficit has declined from $18.4 billion in the first half of last year to $ 14.4 billion this year—expected to be 1.4% of the GDP by the end of 2016-17.
- Foreign exchange reserves are at an all-time high of about $350 billion.
About two years ago, I had put a confidential information in the public domain that Modi has prioritised the poor over the middle class while he has decided to ignore the media. Successive Budget speeches are playing perfectly according to the script (as much as the Prime Minister’s silence on the issues a large section of the media wants him to respond to). It is the politics, stupid! The poor outnumber the middle class by a huge margin. it is they who decide who will form a government. Modi also believes they are more difficult to please. Welfare programmes will, therefore, be this government’s leitmotif across Budgets.
Having said that, he must be warned that the much smaller middle class has the ability to swing the mood of the entire electorate while the reverse does not apply. The core support base has to be kept happy so that it rallies others around. This base will be quite happy this year, thanks to a tremendous boost to employment generation that Jaitley’s proposals will offer. There is, however, reason to be disappointed with the clerical tinkering of taxes levied on the salaried class. This is one issue Jaitley is terribly reluctant to address. The way Modi seems to have prevailed on him largely for the Budget — the Prime Minister had taken the onus upon himself in yesterday’s Mann ki Baat radio address — he must get the better of the finance minister also on this count.
Finally, there is very little in terms of legislation to reduce the size of the inertial and stubborn bureaucracy and executive decision to engage the babus more effectively. The IAS cadre are not Gujarat’s bureaucrats who had to give in to the overwhelming pro-business culture of the State. If anybody fails this government, it will be the government clerks (officers as much as the juniors). The next set of reforms has to be administrative.