India is in its 75th year of Independence. Affected by pandemic, stunted growth, high inflation and low quality of life. Many sectors of the Indian economy were waiting for the budget with bated breath and expectations.
Recovery predictions of many emerging countries are pushed further later than 2025. Though the recovery is a K-shaped recovery, India has done well to get past the shadow of the pandemic slump in the GDP. India was looking towards a budget which has learnt from it’s mistakes and which was forward looking. As the budget has become an exercise to present the government’s roadplan for the year ahead; here were few expectations and aspirations of the country.
These were few aspirational viewpoints which were required to be addressed in the budget. Rather than improving the demand the government chose to put more money in the hands of a chosen few, who also cannot help as the demand has to be revived both in Rural and Urban markets (MGNREGA would have helped). The cash-strapped MSMEs had to be rejuvenated after consecutive setbacks.
These were drafted before the budget.
- It is indisputable that any tax should be simple, predictable, transparent, progressive but not complex.
- We have one of the lowest GDP-to-tax revenues in the World.
- Though GST revenues returned from the Pandemic lows and are around 1Lakh Cr mark, they are unable to fulfill the compensation promised to the state’s revenue of the pre-GST era.
- GST has become anti federal with delayed payments and union government collecting cesses on direct taxes.
- The proposal of the 3 rates GST structure by the NIPFP can be considered to further simplify the tax structure, but the reason why we had 4 rates in the first place was to make it less regressive.
- It is not the number of slabs but it is the sorting of the categories of the products/services for taxation which matter the most. Ex: Bike is a basic necessity but it is taxed under the highest tax slab. Bikes should be sorted under 2 slabs according to their CC.
- To give a great example of disproportionate sorting of taxes and categories – Till few recent Gst council meets, there were different GST slabs for circular and square papads.
- In India, the Income Tax payers as a % to the population is very low,i.e, around 4%; whereas the Tax burden of indirect taxes is very high on Middle class and Poorer sections of the society.
- A well-intended reduced Corporation Tax did not translate into creation of jobs, because of the Pandemic and reduced sentiment even before it.
- Government should look at bringing in new Income tax slabs for the 1L to 5L(but only after reducing the high GST rates- as they are regressive) They Can be as meagre as 1-2% without exemptions as a base in the tax pyramid.
- Tax Wealth and Capital gains in a better way, make Pan Card mandatory for Land transactions.
- Create incentives by providing the promised Tax Charters and Privileges.
- While there is Road Tax, there is again a toll while going on the highway, An insurance is a must. The burden on an average citizen with Taxes, Surcharges & Cesses is a never ending saga.
- The sad part is he gets Pothole filled roads, no compensation for an accident and litigation burden even when he is a victim.
- Give benefits for each of these and publicize them, increase the incentive to be a law abiding, tax paying citizen.
- The incentive to pay taxes is good governance, the government should get in return an increased tax base and Revenue, the citizen his essential services.
- India has a long way to go to fully realise both. But, the steps have to be taken to simplify and edify what Indian Tax authorities stand for.
Debt Profile & Ratings
- India’s interest payments and it’s fresh debt constitute more than half of the budget.
- The Extra Budgetary resources are an unaccounted add-on.
- The debt has to be reduced progressively, as Newer variants are emerging every other day. Pandemic has pushed the Debt-to-GDP to 90%, which is amongst the highest.
- India needs to pay out 256 Billion in the Current financial year, this would be a great opportunity to replace the old debt with new ones with lower rates.
- India should try to utilize the low debt rates around the world, where Debt rates have fallen to less than 1%, if you cannot repay then replace.
Welfare & Spending
- The Welfare spending in India which is neither welfaristic nor transformative; very inflationary, sadly consolatory.
- A populist spending to buy the trust for a limited period.
- The pandemic has pushed many students out of school and their learning has taken a hit.
- Make spending on Schools and Hospitals of Public capacity in Tier-2 cities and Villages a mission.
- Pool in lands, ask for funds, let the government schools in each village function in a large facility, the per square feet availability to a student is not only the lowest but the most unrealistic conditions to expect outcomes from such infrastructure.
- Make the National Educational Policy functional by recruiting teachers to maintain the pupil-to-teacher ratio along with training them to bring in quality of education.
- Let the infra of schools be developed by the same fund which has seen 25% increase in this budget. Even MGNREGA could be used to develop this infra in villages.
- Hopefully a new scheme would be announced before any crucial period like a state election.
- Give additional thrust and funds to the PM Atma Nirbhar Swasth Bharat Yojana, a centrally sponsored scheme to add capacity to primary, secondary and tertiary care health systems along with creating new institutions to cater to detection and cure of new and emerging diseases.
- That is when the Pareeksha Pe Charcha would appeal even to a Government School student.
Trade, Import, Export & CAD:
India has been recording sustained trade deficits since 1980 mainly due to the strong imports growth, particularly of mineral fuels, oils and waxes and bituminous substances and pearls, precious and semi-precious stones and jewelry. In recent years, the biggest trade deficits were recorded with China, Switzerland, Saudi Arabia, Iraq and Indonesia. India records trade surpluses with the US, United Arab Emirates, Hong Kong, United Kingdom and Vietnam.
- Current Deficit is $22.9 Billion in November 2021, Increased from $10.2 billion in the same month of the Previous year
- Currently the total deficit for the Year stands at $147 Billion
- Although the Exports are Increasing at a fast pace in India, but we should not fool ourselves as most of the Increase is due to inflation Worldwide.
- There is no real increase but only nominal.
- India has large dependence on China for components for their Products being Manufactured in India it Includes many Industries from Auto, Electronics, Solar PhotoVoltaic Cells and Pharmaceuticals(API’s), Most Trade bodies are advocating more time to develop the Industries needed.
- India should have a neutral stance rather than a Hostile stance towards China to to gain by integrating itself in the Global Value Chain.
- Also, we have to encourage domestic capacity generation to reduce reliance.
- Cheaper Transport of goods, low cost of Logistics, better incentives for MSME’s are the way forward.
- India should discourage Imports of Gold and other high value metals.
- Focus on Imports of High Value Machinery and provide subsidies in Custom duties to Entrepreneurs, so that they may enable export of Value added Products where they bring in the much needed Foreign Exchange to reduce the Deficit.
- “Over $400billion went out of India to import gold vs $600 billion+ that came in through FPI, FDI & VC. Imagine, instead of gold, some of that money was invested in Indian startups & listed companies. There could’ve been immense and inclusive local wealth creation”. – Nikhil Kamath
- The idea of creating the portfolio of Cooperation, misuse of legislative power of the centre to erase the lines of the federal division of powers has become the norm.
- But the power of cooperatives in transforming lives cannot be discounted, the success of Amul and leadership of Milk Farmers and Milk becoming a sustainable venture .
- The recent failure of PMC Bank, etc also shows misregulation of Cooperatives due to the dual regulation structure.
- So, the farmers have to be educated about forming Cooperatives and increasing their yield as their meagre land holding can give a lot more than what they can do when they work together.
- The cooperation ministry should do well to educate Farmers to collaborate and move in the right direction.
Bangladesh Vs India
- While we are celebrating the 50th Vijay Diwas and being proud of achievements in slicing Pakistan into 2 and creating Bangladesh.
- We should notice, Bangladesh has silently worked towards achieving good GDP per capita, surpassing India, thereby improving the quality of life of an average Bangladeshi.
- A key lesson for India: Women form a large part of the workforce in Bangladesh unlike India where majority of the women are either in low-skilled jobs or are stressed with unpaid work at home. Indian women should be leading the workforce from the front.
- Reserve seats in all tiers of government for Women @40%. That is when laws can be made for women, by women.
- Women should understand that they have to unify, fight for their rights and represent themselves- like the CJI has twisted the adage of Marx – “Women of India unite, you have nothing to loose but your chains”.
- An acknowledgment and acceptance of the same by the Finance Minister would tick the right boxes.
- Not only will there be better representation of women and their issues but the perception on ground would change in their favour.
- The electoral bonds have to be made transparent, though the funding is through proper banking channels. It is leading to corruption, crony-capitalism and opaqueness of funding which does not fulfill the aspirations of a citizen and is working against her.
- All monies should be transferred through electoral bonds but should be made available through RTI not through MCA portal.
Opposition To Agri Laws and later
- The agricultural sector which should have been a self reliant and profitable undertaking has become “ Like a Betal being carried by a Vikramaditya”.
- Agriculture is a Loss making Venture all around the world if you see the real costs involved, it is the same story in India too.
- In India – since the past 50 years it’s been supported through various subsidies in the form of Fertilisers, MSP and other means.(without the support of the government , the sector is barely profitable).
- The agricultural laws are well-intentioned – removing Holding Limits, letting farmers contract with companies and individuals and letting them sell beyond APMC’s; all look excellent on paper.
- But the farmers feared they would be mowed down once they let these acts become the law as they will have less bargaining power as the powerful may run the roost.
- The Judiciary which a key part in it has to be strengthened, not only Mediation but the CJI- suggested Infrastructure maintaining body and an additional body(Like the Delimitation Commission) under the HC’s and Law Ministry to maintain the number of judges as a proportion to the number of population would : reduce pending litigation, simplify approaching the court and increase the trust in the law and order of this country.
- The losses to an average citizen may not be apparent due to a false facade of populist subsidies like electricity, water, MSP & agricultural Inputs.The loss is the opportunity cost if we look at it from the lens of a targeted scheme which aims to educate, inform & skill the farmers.
- To Improve their profitability and to invest in allied sectors.
- The Farm laws could have helped to develop the Food Processing Industry in India which would have made Agriculture from a loss making venture to a profitable one, As India is placed rightly to export Food to the Middle East, Europe, North & East Africa.
- Also the Industries Could have provided Employment in the much stressed Rural areas.
- Increasing the Incomes of the Farmers in the Rural Areas, as the farmers could synergize into a Co-operative and sell at an attractive price to these Companies.
- The food processing industry could be a boon. But the farmers should be able to defend themselves in case of an Injustice meted to them.
- The Government should focus on strengthening the judiciary at the grassroots level and also inform about the same. Ex- GramNyayalayas
- The number of judges, the court infrastructure, the accessibility of courts, all add up to this opposition to Farm laws.
- If the NDA government wants to explain the real intentions- Strengthen Judiciary, let institutions work to their highest potential.
- The movie Jai Bhim sheds light on the same.
- Climate change is a reality, UNFCCC is ready to pass on the baton to an even more irresponsible UNSC.
- The developed nations are not here to help, the INDC’s are just an apology but no realtime reform.
- The urban floods, dust storms, frequent-wild cyclones and paralysed cities are a reality.
- The government would be better prepared to focus on a mission like the Jal Jeevan Mission; a Paryavaran-Jeevan Mission, it is more important than a Smart city Mission with a Centralised Control Center, what can you control without laying a Storm Water drain or clearing an encroachment on the Nala.
- Urban Environment -All trees which are about to be cut-down should be compulsorily relocated, the wetlands, the medieval routes for cities & storm water drains should be explored and Houses, establishments on it should be cleared and people rehabilitated.
- Environmental protection, New renewable energy projects should be encouraged by the government but without a national Mission-mode plan to resuscitate our cities, climate change is bound to create more loss than we can stop.
In this never ending pandemic world, India has to focus it’s spending on its fair share of problems. The debate about the $5Tn economy has created its own challenges. India should be focused on being resilient to future waves and create a robust domestic economy. The way forward is to bring in the real ‘minimum government, maximum governance’, creating Ease of doing business by resolving policy dilemmas. India has recovered better than other countries. We should focus on these basic dilemmas and create a better economy making it human-centric.
Moving forward with good taxation policy and budget choices, India is quite capable of getting to it’s target of $ 5 Trillion if not by 2025, sometime in the near future. Again, it is not the size of the GDP that matters, with huge inequality it is the Health Outcomes and the Literacy Outcomes and Equal Opportunities- i.e,capacity of an individual to develop oneself fully, that can only make a difference when India celebrates 100th year of independence.
Amrit Kaal has come so when the real Amrit of development is delivered to the citizen, the Halahala will be consumed by the countries who believed the idea of India is a myth and would fail.
Credits – The Titles, Content and anecdotes are by Pranav PSS, my friend JMR Manish has added important information; he is a CA Final Student added imp. Info to the fields of Taxation, Agri Laws & Trade sections.
If there are any errors factual or grammatical please bring to my notice. Thanks for reading and keeping up with this.