Given the build-up, no Budget could have lived up to the hype. Like the Railway Budget, this one lays out a grand vision, has many innovative ideas to boost capex. But it falls short, quite short, when it comes to tackling subsidies
Apart from government capex push, lot of new measures to boost investment, ranging from favourable tax treatment for investment vehicles and real estate trusts, an infrastructure fund, and a refinance fund for SMEs.
Though the Budget imposes fresh levies of R15,068 crore, it does this in a smart manner. It replaces the difficult-to-collect wealth tax with a 2% surcharge on the well-heeled. Most important, while still not scrapping the retro tax, it deals with most tax fears of foreign investors. There is to be no MAT on FIIs, GAAR has been put off for two years, global amalgamations will not be taxed, clarity on taxes on global capital gains that have an India leg, royalty taxes slashed.
Nothing on reducing government shareholding in banks or how to provide them the R2.4 lakh crore they need for recapitalisation. But promise of a bankruptcy law and special courts for commercial disputes send Bank Nifty soaring.
As the FM said, both EPF and ESI are said to have hostages, rather than clients. So, in an attempt to build a genuine pension market in the country, a lot more tax breaks given to New Pension Scheme, certain level of employees free to opt out of EPF, and ESI can be replaced with any other health insurance product. Big reform.
Go for gold
Given the Indian obsession with gold nearly wrecked the current account deficit, it is not clear why gold dematerialisation schemes were not developed earlier. Doesn’t matter, they’re here now.
Farm reforms talked of in the Budget predicated on phasing out ration shop-based subsidies. Till you have physical rations, you need FCI procurement, and high MSPs for wheat and rice which, in turn, prevent agricultural diversification. Jan Dhan Yojana also needs food subsidies coming in cash. Surprising that the food subsidy has actually gone up, even if marginally. Also missed the bus on cutting LPG subsidies.