A layman's random take on India's National Budget for 2016-17

1. A Layman’s take on India’s National Budget for 2016-17
Budget 2016-17 is intriguing in its contours. It creates 9 pillars and then proceeds to derive
instrumentalities to achieve it. However, it leaves more questions unanswered than answering
them. Here’s how, to my layman’s mind:
1. When additional revenue sources are less than Rs. 20000 crore in 2016-17, where would
funds for such massive proposals come from?
2. A healthy one per cent cess has been foisted on existing service tax. Could someone tell
me the actual percentage rise in prices owing to the snowballing effect since services are also
purchased by service providers and then factored into their customer pricing before adding
service tax + cess?
3. The ratio of Plan to non-Plan is roughly about 40-60. Camouflaged in the latter is the 7th
CPC and OROP. Thoughtfully, FM lowered his tone when he mentioned these items and left
the budget provision unstated. There was no mention of cost-cutting in government in
exchange for the 7th CPC. Given the propensity to buy political support, the benefits are sure
to be substantially raised in final delivery. Besides, there will be a corresponding rise in
pension liability for pre-2004 employees. Has the government decided that it is safer to buy
peace with babudom without any overdue corrective surgery? Is it also reasonable to expect
babudom to splurge CPC moneys for they are traditionally ultra conservative in spending
matters?
4. Incidentally, Rs. 1.50 lakh crore for CPC would fuel 1.67 crore jobs @ Rs. 300/day for 365
days/annum under MNREGA in rural India. Does it not therefore stand to reason that
MNREGA ought to have had a much higher priority, particularly when manufacturing India
is looking to come out of its recession via spending in rural India?
5. Justifiably, the rural sector has been granted top priority, except doubling rural incomes
that is no more than sloganeering. Rs. 2.28 lakh (?) crore has been provided the needs are
perhaps closer to Rs. 30 lakh crore, by conservative estimates in the next 3-5 years. When
manufacturing is down, why does the Budget make no mention of any role for them, in
exchange for operating these facilities on pre-paid tariff basis and BOO basis with effective
regulation? From what sources will the government fund its commitments?
6. The Budget talks of doubling rural incomes by 2022. How would this be achieved, save for
releasing funds on irrigation, panchayats, etc.? Would the distressed manufacturing sector be
involved in providing income earning sources and infrastructure in rural areas on long-
term/pre-paid lease/tariff basis? If so, what is there in it for the service providers?
7. Crop insurance is old hat. What is new in this scheme?
8. Although the health sector appears, prima facie, upbeat about the insurance scheme, given
uncertainties of govt. funding, will the health sector be disappointed, again? Wouldn’t it have
been better to provide interest subsidy to borrowings to set up privately-operated specialty
hospitals in all major district HQs? With the same amount of money, much more would be
achieved and the health sector would have been happier. Further, why exempt bidi and
cheroot (?) smokers from any duty hike? Likewise, why not withdraw alcohol manufaturing
licenses by 10% each year by not permitting states to renw more than 90% licenses of the
preceding year every year? Why not reduce taxes on NICTOEX-like substitutes?

2. 9. PSBs get about Rs. 25000 crore for recap. However, there is no mention of recovery of
NPAs, action against loan sanctioning officers, limitations of recapping via the budget, etc.
Will our banks remain safe to keep our monies in when the budget can no longer sustain
recapping?
10. A large number of proposals like training centres, e-platforms, digital skills, etc. find
mention in the Budget. However, why is even a bare outline of the implementation modalities
for each scheme not there in the Budget appendices?
11. Taxpayers, the most articulate urban voters that have supported the BJP, have been
severely short changed. No hikes in exemption limits on standard deduction, HRA, CEA,
conveyance, health/life insurance premiums, forced saving from EPF final withdrawals to
save tax, and much more. Rs. 3000/annum deduction translates to 6 kg. of average quality
fish in the CR Park market/annum, i.e. 100 small cubes of clean fish/annum collectively for a
family of four, as good as a framed photo of a fish on the dining room wall in consolation!
How many will still vote BJP in 2019?
12. Why have AADHAAR and MNREGA suddenly become holy cows when they were no
more than pure evil pre- May, 2014?
13. Other than talking of an unknown quantity of a digital financial management system, why
does the Budget not propose any corrective real-time mechanism on utilization of
developmental funds in 2014-15 and 2015-16?
14. There is no mention of incentives for the alternate energy sector. Instead there is a clean
energy cess of 0.5% proposed without any stated objective. The unutilized education cess
collections are huge. How does the government explain this before proposing another cess?
15. Skill development and education funding are equally amorphous. Why should the state
set up any more training establishments and other education infrastructure when state
institutions have all but collapsed? Shouldn’t some thought have been devoted to interest
subvention and ask the private sector and PSUs like EdCIL to borrow and invest on BOO
basis with effective regulation?
16. The automobile sector too has reason to be unhappy. Will the cess of 1-4% on cars
underwrite the costs of converting existing cars to electric ones or at least 50% of the cost?
Driving cars off the road is hardly the pathway to containing environmental pollution. Will
power blowers and commercial vacuum cleaners be cheaper for municipal bodies to clean the
dust from our roads?
17. What is most interesting that the Budget talked of disinvestment and strategic asset sales
without any ball park figures. Is getting fellow PSUs to buy stock in divestment sales prudent
policy since their liquidity is tied down for most uncertain return on investment? Will future
sales follow the same trajectory? After all, PSU liquidity is also the government’s liquidity,
lest any major crises strike the nation and government’s own cash balances with RBI are very
small.
18. I am also not clear about corporate taxation’s 20-25% change. Maybe someone can
enlighten? The flat Sensex and NIFTY speak of open disappointment.
19. If PSBs are to recapped owing to massive NPAs then the logical course for the
government would have been to force (which in any case is inevitable) real estate majors that
are sitting on lakhs of unsold inventory to sell flats to prospective owners by pegging prices
on sq. ft. and standard area (floor & geographical) basis so as not to exceed 50% of their
original advertised prices. That way at least the PSBs would have been able to recoup part of
the NPAs.

3. 20. The Budget does not address the issue of diverse subsidies. The government was fully
seized of massive pilferage in all subsidies and Plan schemes that perhaps take away as much
as 50-70% of grants and devised the JDY. Then shouldn’t it have converted all subsidies and
Plan payouts from scholarships to baby milk powder into a single monthly payment directly
into JD accounts as the logical conclusion?
Overall, my impression is that this Budget is yet another product of sheer unprofessional
fantasy and political short sightedness. While I understand, the government has a very severe
financial crunch, the logical course would have been to involve the struggling manufacturing
sector in creating infrastructure and providing services on BOO basis. The socialist touch in
the budget is unmistakeable, not far different from successive undistinguished UPA and
Congress budgets of the 1970-80s and 2000s. There is no sign of any administrative reform to
cut down waste in government that would have made doing business in India far easier.
Nor is there any attempt to enlarge the personal tax base and bring in agricultural and
horticultural incomes (above a threshold), home-based unorganized businesses like tuition,
PhD thesis writers (that proliferate outside the IIT-D premises), fish farmers, small
neighbourhood shops (above a threshold), etc. Recognition of the severe limitations of
service-delivery by government ought to have been countered by an active effort to co-opt
other sectors of the economy on BOO basis and provide them appropriate tax and interest
subsidy incentives to create and operate infrastructure on behalf of government within an
effective regulatory and enforcement regime. Last, but not the last, there is no attempt to
either fix responsibility for genuinely bad loans or to force defaulters to sell their unsold
inventories at govt.-fixed prices in exchange for part amnesty from repaying dues to PSBs.
Nonetheless, the budget has certainly identified several areas of reform, although key ones
like GST are hopelessly missing. It is time, this budget was dispassionately debated at length
and deficiencies corrected, instead of mindless disruptions in Parliament by our elected
representatives. There is still huge scope for modification of the proposals, indeed incorporate
new ones too. If our representatives fail, the electorate is unlikely to forgive them in 2016-19
that would plunge the nation again into another era of opportunistic coalitions.
The author is a senior public policy analyst and commentator