Finance minister Arun Jaitley's Budget 2015-16 may have disappointed the masses, middle class and markets as he has not handed out sops as they expected. It would have been brave and bold of him to hand them out as expected. Several FMs, including P Chidambaram in his dream budget, did it excessively.
Jaitley did not play to the galley of expectations or the perceptions that says all is well. Sitting where he is he has belied the fancy numbers put out by the CSO of the revised GDP numbers and seconded the criticism of the CEA in the Economic Survey.
The FM has taken heed of the global slowdown and the inherent opportunity and risk that lie there. In a way, Jaitley has become a central banker whose move and words hide more than they reveal.
The opposition is alleging the Budget is pro-corporate and anti- farmer. There is little headroom on revenue front and no leeway on expenditure. So plan expenditure for most ministries is down, barring his own and couple of others. The investment environment has actually not changed much from 2013-14 with the private sector still waiting and watching.
The tax revenues show a lack of economic growth perception. The actual gross tax revenue in 2013-14 were Rs 11,38,733 crore and Jaitley's last budget had estimated this to grow to Rs 13,64,524 crores, a growth of almost 20 percent.
These were numbers that were carried forward from Chidambaram’s interim budget and not tinkered at all. It was an optimistic growth target and was fed by the same hype that is currently feeding the perception of high economic growth. Which is why he said ‘Phool khilane hai... par bagh kantein kai purine hain.’
Budgetary estimates are generally higher than actual receipts and are never fully accurate. But the revised estimates for 2014-15 show the tax revenues are at Rs 12,51,391 crores a growth of approximately 10 percent, that means a shortfall of almost 10 percent. If the fuel prices had not dropped we would have been staring at a very challenging situation.
He is still trying to project an upbeat perception of 8.5 percent growth in GDP and at the same time curtailing all big spending. This is the quandary that the finance minister expects the common man to understand, and this is what will not be in the noise that even the pink dailies will not explain on Page One.
Not tinkering with the tax rates for the middle class or asking them to ‘take’ care of themselves may not go down well. But some things will long be remembered - as the strokes of Chris Gayle - after the pink newspapers have become packing papers and the noise in the studios shift to a new controversy.
i) For instance, laying down a roadmap for reducing corporate taxes, and reforming the corporate tax structure by removing exemption. This is Jaitley’s 'saral' taxation attempt for the corporates. This will occupy centerstage in industry associations as they lobby heavily for retaining the exemptions. Tax consultants who position themselves as management consulting firms will be in the forefront of this charge, half a league, half a league at a time. Their tax advisories business will be hit and this makes up the bulk of their revenues.
ii) The move to create a super regulator through the merger of the Securities and Exchange Board of India and Forward Markets Commission will reduce regulatory positions, grey area between two derivative markets and also scams (remember Financial Technologies and National Spot Exchange). Moreover, Jaitley has elevated the Sebi to a status higher than the RBI as it will get more resources, people and powers. It also makes the finance ministry more powerful as the Sebi chairman finally reports to the finance minister. It also sets the roadmap for UK Sinha’s successor at SEBI. It creates so many possibilities, consolidation or mergers of exchanges. Resulting in a seamless market, arbitrage opportunities across exchanges, instruments, stakeholders, traders across the world would be rejoicing. Expect consolidation in trading teams in brokerage firms, etc.
c) By creating a national infrastructure fund, Jaitley is for the first time opening up the floodgates to long-term fund to participate in the India opportunity. Pension funds and sovereign funds will follow this development closely. Expect roadshows unlike the ones which the UPA government did in its first term. But it won’t be easy as any private equity fund manager will tell you. Don’t expect an immediate closure as it will easily take 12-18 months. It will take all the marketing skills, tax arbitration moves, sovereign guarantees to sell this fund. It won’t be easy, but it will be something just right for the minister of state for finance Jayant Sinha.
d) A bankruptcy law a first for the country that will ease the process of closure of NPAs. Kingfisher and several companies in the recent past have taught us that the banks need this law more than they need anything else. If it allows them to seize management control from dubious promoters and recover funds this law is needed asap. A tremor would have gone up the spine of several promoters who have siphoned off bank loans with impunity.
The author is is a senior journalist and policy commentator based in Delhi. He tweets @yatishrajawat
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Updated Date: Mar 02, 2015 09:12:03 IST