Savings, travel, demand need a boost

The country has been looking for a happiness budget. It was pining for cut in multiple pricing, low prices and high growth. Finance Minister Nirmala Sitharaman’s budget does not ensure it despite her expectation on 10 percent GDP growth. Sitharaman tries to send political messages to Kashmir, Tamil Nadu and assuage the conservative through quotes in Kashmiri but has not listened to her own Economic Survey. The bankers, RBI or IMF, doubt growth path. She talks of an aspirational India. It focuses on rural development, wellness, water, sanitation, education and skills and a farm product for each district. The allocations or increases are meagre, though promises wider coverage like 1000 more hospitals under PM Jan Arogya and immunization of 12 more diseases under Indradhanush. The INDSAT examination to attract students from Asia and Africa is a good move to make the country an education hub. Yes, with that education will be having FDI and more expensive. Skill development is given Rs 3000 crore out of an education allocation of Rs 99,000 crore, an increase of Rs 6,000 crore.A cash strapped government is high on spreading its thali and has little to checking inflationary trend.The sagging economy needs relief. Even the farmers in the gaon, garib kisan budget lose despite higher access to farm credit. Subsidy cuts outweigh it. The cut in fertilizer subsidy by Rs 9,000 crore increases farm costs. The massive Rs 69,000 crore cut in food subsidy to Rs 1.15 trillion from Rs 1.84 trillion in 2019-20 estimates is to hit the procurements by the Food Corporation of India (FCI) the most. The farmers even now are unable to get MSP. The coming year may be more difficult for selling their produce. The constriction of FCI is likely to help private food grain buyers. Doubling farmer’s income may not be easy. The budget under the pressure of officials to adhere to fiscal deficit target has become an albatross for the common man. It looks more like continuation of the harsh Manmohanomics. Taxes remain high, reliefs nil and available necessary facilities are charged whether in railways or income-tax.Cafeteria approach of two rates for the income-tax – lower rate without discount and higher with existing discounts – has added to the confusion. It is not wise to deny the discount to the taxpayer. It is like a dosa being served but charging extra for the chutney. Not a wise accounting.She should amend the proposal and offer the new I-T rates with discounts. Rather for a good economy she may announce higher benefits for savers up to Rs 5 lakh a year. It would make banks healthy and higher savings would boost demand.

It also disincentivises savings in a country that has a culture of family savings of 10 to 20 percent a month. The FM may know that India grew on domestic savings till the ushering in of Manmohanomics in 1991. Even BJP ideologue Deen Dayal Upadhyay has stressed on it. The banks, LIC and National Savings Organisation immensely contributed to the growth through such small contributions. Foregoing savings nobody rushes to the market to make purchases and boost manufacturing and industrial production. Savings interest rate must be raised to 10 percent. Almost six percent fall in savings has hit the public sector banks hard calling for their repeated recapitalisation – paying from taxpayers’ money.  It is not desirable economics. Even for social security people would have to make expensive purchases from insurance. And the harbinger of India’s growth since 1950s, LIC is unwisely being privatized with dilution of its stake. Private insurers are thriving on defrauding the depositors. LIC has been built brick by brick by the people and should be left apart.Reductions in corporate tax to 22 percent and for new ones to 15 percent are welcome. But ignoring the partnership firms, the informal sector that generates the maximum employment hits the poor. She says they need not have audit up to a turnover of Rs 5 crore from present Rs 1 crore. The caveat is they should not have more than 5 percent or Rs 25 lakh income in cash. The poor man thrives on cash and that is the fastest way to growth because every digital system has a cost and a middle man. The large companies may, and that is also a big if, thrive but at the cost of the marginalization of the poor for who DD Upadhyay toiled for in his antyodaya concept. The FM may do a rethink.The NRIs have been significantly contributing to growth as well as creating international prowess. The budget proposes to bring them under I-T net. This would hit NRI remittances as also forex reserves. With all modes of transport air, water and road under private sector, she needs to leave the railways for the poor. The poor do not have many trains left to suit their pocket. With her proposal to privatise – making train fares expensive – 150 more trains, the poor would have little choice to travel with ease, a slogan FM repeats in the budget. Railways are not in a poor financial state. Its accounting is. Please correct it. There is no subsidy on railways and it is not in loss. Similarly, the road sector is on a spree of levying extortive charges. The NHAI is not paying its contractors on time. How it can have cash crunch when toll rates and other charges are the world’s highest.  The total budgetary expenditure on road sector including PM Gram Sadak is less than that – Rs 1 lakh crore, earned through petrol cess of Rs 10 per litre. It needs to probe where the toll is going and who is benefitting.

Road and rail travel has to be made people-friendly. Let people travel freely and add to the wealth of the country. High tolls, fees, charges and taxes are preventing the economy from being dynamic. 

The kisan’s assets post note-ban has crashed. No government has helped them. The packages announced are through bank credits. They need help. Let India not disincentivise cash economy. Europe is in ferment against banks and digital economy. Let India lead and not miss the bus.

With a little touch there can be many winners and flight to recovery may be as per FM’s aspiration without the path being wobbly.