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’Budget makes empty promises, burdens tax-payers’ : Chidambaram


Mangalore Today News Network

New Delhi, Feb 06, 2018 : Senior Congress leader P Chidambaram says the Union Budget for 2018-19, presented last week, lacks focus and does nothing to bring relief to several sections of society. Taking a dig at Finance Minister Arun Jaitley’s new National Health Protection Scheme (NHPS), Chidambaram said no fresh money had been allocated for the scheme.

 

chidambaran 6 feb 18


Chidambaram, a four-time finance minister who has presented the most number of budgets – nine – wondered if Jaitley wanted to raise new taxes in the middle of the year to pay for the NHPS. He is also concerned at the government’s trade protectionism in the name of ’Make in India’ and questioned the rationale behind reversing a more than two-decade old trend of reducing customs duties. Excerpts from a conversation with DH’s Annapurna Singh.

How much of a concern is the fiscal slippage, both the breaching of the 2017-18 target and the setting of a revised higher target for FY19?

It is a grave concern. By breaching the target for this year and the next year, the government has put in doubt India’s commitment to fiscal consolidation. Financial analysts and global investors will view this as an investment risk. Besides, a higher fiscal deficit will be inflationary.

The budget makes a lot of promises on the health and agriculture fronts, but there is little in terms of allocations. Is the government going to rely on extra-budgetary resources?

What are these extra-budgetary resources? They are mainly surpluses of the public sector enterprises (PSE), and it is expected that they will invest these resources in new industrial projects. But that will not advance the goals of the health and agriculture sectors. No money, I repeat, no money has been allocated for the much-trumpeted healthcare programme. The finance minister said he will raise resources. How? By resorting to new taxation in the middle of the year? Likewise, in agriculture, money has been provided for some on-going schemes, but that is not an additionality. No additional funds have been allocated for the promised MSP that will be "cost +50%".

Budget has done very little for individual tax-payers.

Of the four engines of economic growth, private consumption is one. The engine of private consumption stalled sometime ago. This budget has done nothing to stimulate aggregate demand. On the other hand, the tax burden on the middle class has been increased. The average tax-payer will pay more. Standard deduction will give a relief of Rs 8,000 crore to tax-payers but the government has taken away Rs 31,000 crore from them through long-term capital gains (LTCG) tax and additional cess. I think tax-payers have been burdened with additional taxes and, consequently, private consumption will take a hit.

The budget has reversed the trend of lowering customs duty. Is this the right prescription to promote ’Make in India’?

The government has gone back to protectionism. Since 1991, the country’s economy has been on a certain path - reducing tariffs and exposing the Indian manufacturing sector to competition. India wishes to join several multilateral trade treaties. Recently, the ASEAN leaders urged India to take a decision on closer trade relations with them. Such treaties are based on tariff reduction.

At Davos, the prime minister spoke on free trade, open economies, competition. Within a week, the government has reversed direction and imposed additional custom duties on a wide range of products. This is protectionism. I can understand raising tariffs for specific goods under certain circumstances. But to raise tariffs across the board means reversing the direction followed by successive governments since 1991.

Does the minimum support price (MSP) promised by the government (cost+50%) look real? Will it be inflationary?

I welcome MSP at "cost+50%". But any announcement on MSP at this stage will be effective only after the next kharif in September-October. It will bring no immediate relief. Besides, there is no clarity on "cost". The FM said that the government had already given "cost+50%" to many crops. Which crops? If that is true, why is there so much ferment and unhappiness in rural India. Dr M S Swaminathan and Dr Ashok Gulati, among others, have raised many pertinent questions on this. Who will answer those questions and when? If the "cost +50%" formula is implemented, it may be somewhat inflationary, but that would be a small price to pay for the sake of welfare of our farmers. The government and RBI must find other ways to control inflation.

The Economic Survey said rising crude oil prices pose a risk to India’s growth going forward. Now, it is $73/barrel. In UPA’s time, it had gone as high as $146/barrel. How did you manage that high a rate and how should the NDA government do it?

When prices of crude oil declined to below $40 per barrel, the government reaped a bonanza, but wasted that opportunity. High crude oil prices will impact retail prices of petrol and diesel. The government can do two things: it can cut the central excise duty on petroleum products and give relief to consumers. Or, even better, it can bring petroleum products under GST. There may be an impact on the fiscal deficit, but the government must explore other sources of revenue rather than over-burdening consumers.

So, who was this budget for – middle class? Rural poor? Farmers? What message has it conveyed?

The budget has doled out grand announcements but there is nothing particular that it has done to give relief to specified classes of citizens. From the reactions to the budget, it appears that every section is dissatisfied. The government seems to have no goal, no focus.



courtesy:DHNS