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STATE OF ECONOMY
A Budget for everybodyS. Narendra
Finance Minister Nirmala Sitharaman with 'Bahi-Khata' ahead of the
The Union finance
minister Nirmala
Sitharaman deserves a
flower bouquet for her
2020-21 Union budget.
It seems to contain
flowers of many varieties and
fragrances deservedly offering a
mixed experience. She was at
pains to reassure that the Indian
economy was on a sure footing and
her budget would put it back on
fast-track.
There was an invitation to the states to undertake
changes in the outdated laws and rules coming in the
way of farmers’ enterprise and prosperity. An old idea
of setting up rural godowns for storing grains floated
during the Janata
government in 1978 has
been revived in this budget.
Emphasis on organic
farming and an appeal for
district-wise specialisation
in crops figured in her
budget. Both ideas could
have very significant
implications with regard to
yields, incomes and for the
environment.
On the income tax front, there are fresh initiatives to simplify the compliance process, reduce face – to- face encounters with tax authorities, and extend tax concessions for encouraging investment. For Individual's with an income of less than Rs 15 lakh, the budget offers a choice.The taxpayer can choose to claim permissible tax exemptions or forego them and pay a new lower rate. The finance minister said that the latter with an income of Rs 15 lakh would save Rs 78000. The tax concessions enjoyed by both the builders and buyers of affordable housing are continued. The foreign sovereign wealth funds investing in select infrastructure projects have been offered attractive tax exemptions. While the super rich may pay a little more tax, the changes in the Dividend Distribution Tax spares the dividend paying firm from the tax burden.New customs duties have been introduced to protect certain domestic production facing unfair competition from exporters. As said before, the budget tries to nudge the economy on many fronts.It is in the nature of a work in progress. The sense of urgency and focus needed for kickstarting a stalled economy is missing. Key facts
This budget was presented against a very somber backdrop of a slowing economy
( nominal GDP growth at 7.5 per cent and 4.5 per cent in real terms). In the first eight
months of FY 2020-21, the government expenditure was about Rs18.20 lakh crore,
while earning tax and non-tax revenue of Rs 10.12 lakh crore, a gap of over Rs 8 lakh
crore between revenue and expenditure.
1970 And 2020 Union Budgets.Both presented by lady finance ministers. But separated by the intervening five decades. The finance minister Nirmala Sitharaman could not complete her budget speech . 50 years back, prime minister Indira Gandhi presenting the budget as the first lady finance minister, could not formally complete her budget presentation, as she forgot to move the mandatory Finance Bill giving effect to her taxation proposals.
Indira Gandhi
Indira Gandhi’s 1970 budget was historic
in more ways than one. Stooping to
conquer the
c o m m a n d i n g
heights of the
economy, it
unrolled a
detailed agenda
for inclusive
growth under
the title :
‘growth with
social justice’. It
was singularly
focused on the development of farming
(largest sector then), rural development
and poverty alleviation. This budget had
followed the government’s nationalization
of 14 commercial banks a few months
before. This budget was remarkable
because of its steep increases in
corporate taxes. Coming to the present one by Nirmala Sitharaman, one notices an emphasis on wealth creators, a pronounced pro- businesses stance, with offers of tax concessions for them. Also there is a zeal for promoting ‘swadeshi’. It reasserts the government’ s commitment to push up agriculture and rural development. A 16 - point agenda for farming is unveiled aiming at fulfilling the prime minister’s promise to double farmers incomes by 2022. Unlike Mrs Gandhi’s budget that was focused on the small and marginal farmers who constitute the bulk of agriculturists, the proposals in 2020 budget are less focused. The agriculture sector growth rate hovers between 3- 4 per cent a year. How its growth rate will be doubled, trebled for doubling farmers’ incomes is not explained. Her announcement on increasing bank credit to 15 lakh crore rupees for farming for the year would not have been possible without Gandhi’s bank nationalisation. A big contrast in Sitharaman budget is its reliance on big disinvestment in PSUs, including that in IDBI, LIC. The budget of 50 years ago deservedly had attracted much criticism. Yet it had an unabashed clear motto and direction- ‘garibi hatao’ under a state dominated economy . The motto of the present one is different, in tune with the times and lofty. It shows a preference for wealth creators, less government, an export –led open economy in a world that is closing trade borders. And the budget introduces customs levies to protect domestic industry. The signals that emanate are mixed. Mrs Gandhi hesitatingly announced a budget deficit (gap between revenue and expenditure) of Rs 550 crore. In Nirmala Sitharaman budget, this exceeded Rs 700,000 crore (as per the figures released by the Controller General of Accounts).
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