Union Budget: The dog that didn’t bark

The Union Budget presented on February 1 by Finance Minister Arun Jaitley saw the continuation of fiscal prudence and greater transparency in governance. One does not quite know why Rahul Gandhi expected fireworks; he ought to wait for Diwali for that. It is better that firework announcements, such as demonetisation, be made outside of the Budget.

In fact, once GST is through, the Budget would always be ‘a damp squib’, since indirect tax rates would be fixed and stable, and direct tax rates are, in any case, changed in baby steps.

For this commentator, the Budget is more important for what it did not say/do. Sherlock Holmes, solving a mystery, got a clue from the ‘dog that didn’t bark’.

The FM stayed the course of fiscal prudence and held the fiscal deficit at 3.2 per cent of GDP. This prudence stems from both belief and necessity. India’s household savings rate is declining and insufficient to fund spending, especially on infrastructure. Foreign investors are needed, both direct (FIPB has been, rightly, disbanded) and indirect (the low withholding tax of 5 per cent has been extended).

A better credit rating, stemming from fiscal prudence, would lower the cost of foreign capital.

Of the ₹21 lakh crore to be spent, ₹4 lakh crore would be spent on infrastructure, including roads, airports, railways and ports. This is much needed. The FM has cleverly leveraged the land assets of airports to attract private investment.

A network of inland waterways, as also the dedicated freight corridor, would significantly reduce the cost of transportation of goods. So will the advent of GST and the wastage of time at octroi points.

A long overdue thrust has also been given to agriculture. Over 66 per cent of population depend on it but earn less than 15 per cent of national income; the situation is iniquitous. The plan to double farm income in five years is to be welcomed. There are many prongs to this: higher productivity in production, less wastage in transportation (a third of fruits and vegetables get damaged in transit, a criminal waste) and higher prices (mainly by reducing the levels of middlemen).

All these and more, are steps which are welcome. But there are some things which this commentator was hoping for, but which went unmentioned. Perhaps for political reasons, with elections to five States forthcoming. What has not been done (the dog that didn’t bark) was to tweak the blanket exemption from tax for any income declared to be agricultural income.

The FM has done a lot of data mining to show that Indians are a cash-evasive society. One is sure that data mining would also reveal that small towns in agricultural areas are the biggest market for luxury car sales. Why can’t he then do the obvious, viz, bring the fake declarers of agricultural income into the tax net? The plugging of this loophole will do far more towards cleansing political funding and for the attack on black money than the lowering of the limit of donations to political parties to ₹2,000, no questions asked. This is easily circumvented by simply increasing the number of donors ten-fold.

The US Fed has, fortunately, postponed hiking interest rates. The biggest challenge in India is to find jobs for the burgeoning population. With Trump curtailing visas, the IT industry, which provided a lot of them, is reeling. Jobs will have to largely come from infra spending. And this is what the FM has done.

(The writer is India Head, Euromoney Conferences. The views are personal.)