Nirmala Sitharaman’s first budget speech in Parliament was a long one but tepid and a bit fuzzy on details
Nirmala Sitharaman was the first woman Finance Minister to present a Budget in Parliament and the first to break yet another glass ceiling. On that count, she needs to be commended. But did her budget deliver? After all, India needs to perk up its economy to get local manufacturing going as well as boost its services so that the hundred million plus youth, who are expected to join the workforce over the next decade, can find gainful employment. The headlines will obviously look at the fact that the super-rich will be taxed more, even as those earning in excess of Rs 2 crore are a minuscule proportion of Indians. The hike in excise duties on gold and fuel though will have a cascading impact on the pockets of several as will the move to raise excise duties on a range of components. Ostensibly, this is aimed at promoting Indian manufacturing and recognises the fact that India’s trade deficit with China is predicated on electronics trade. It will still take months and thousands of crores of investments for domestic manufacturing to really take off. The Budget left the markets puzzled and most large scrips declined a small amount, highlighting a couple of facts. A general lack of enthusiasm for the Budget, which didn’t even set a realistic fiscal deficit, as well as the fact that it matters less, particularly since the Goods and Services Tax (GST) started.
That is not to say that there weren’t some good proposals here and there, even if the Finance Minister did not go into huge details about allocations. Clearly, the Government has made public infrastructure and affordable housing its main developmental planks and states that over Rs 100 lakh crore will be spent on infrastructure over the next five years, including a massive spend on rural roads. Positive decisions included the fact that housing finance companies, which have been under stress lately, will now be regulated by the Reserve Bank of India. There is also an effort to improve the public float of listed companies and thus a possibility for incremental disinvestment, with the government again setting an ambitious agenda for disinvestment. It wants to cover most medium and small-scale industries under a lower rate of corporate tax but did nothing to remove the impression that India is a high tax country for large corporate entities. The move to allow FIIs and FPIs to invest in debt securities will definitely help in providing long-term finance for infrastructure development. And except for the announcement of setting up 10,000 new farmer-producer organisations and incubator support to agro start-ups, both of which can take the idea of agro-preneurship ahead, there was no major boost to the agriculture sector either. Every Finance Minister in India has a challenge, a challenge of balancing the need for massive social sector spending. So the need to get electricity and gas into every village household by 2022 was made very clear, along with the need to promote industry and manufacturing. The Economic Survey released on July 4 makes it clear that private sector investment has to take the lead, but how will large private sector investors react to this budget? The Minister said that the tax authorities will look into the controversial ‘angel tax’ but also announced a rather silly new channel for start-ups on Doordarshan. This was a strange Budget, but with the high possibility of another full Union Budget within six months, particularly if the Government financial year changes and starts in January, it means that things could be very different in the near future.
