Still a distant dream

FINANCE Minister Arun Jaitley’s last full Budget is more utopian than practical. It has disappointed the middle classes because instead of relieving them of their immediate anxieties, it has opted to set medium to long-term goals. Public policy formulations this Budget is studded with are customarily spelt out by a government in its incipient stages, not at the fag end of its five-year term. The BJP government will seek a fresh mandate in less than 15 months, but wants people to wait till 2022 for it to fulfil its social compact — a house for every family, quality education to tribal children, a rejuvenated educational infrastructure and doubling of farmers’ income. No incumbent can vouch for the continuity of its policies by a successor government. And, no seasoned political party should entertain supreme overconfidence about its re-electability. Mr Jaitley is entitled to his cocksureness. As the Budget is an annual exercise, the average person wanted him to provide specific solutions to the three economic challenges — rising inflation, growing unemployment and vexed farm loans.

Inflation has already left behind the 4 per cent comfort zone, mainly because of a spurt in prices of food items. It is expected to even breach the 17-month high of 5.21 per cent last December, due to rising crude oil prices in coming months. The 32-page Budget speech, however, maintains a stony silence about the creeping inflation rate. The entire peroration only once mentioned an anti-inflation initiative and it was about inflation-proofing emoluments of MPs.

The doubling of farmers’ income by 2022 googly has foxed many because FM Jaitley failed to provide any plausible roadmap, apart from making an impractical proposal of keeping the minimum support price (MSP) of all kharif crops at one-and-a-half times their production cost. It appears to be dead in water because there cannot be a single formula to determine input costs of geographically-divergent crops. Even in its present form, MSP has been an elusive chimera because several times government-determined support prices are often less than their input costs. Recently, there were instances of farmers in several areas being forced to offload their produce at below MSP prices. The MSP will fail to work unless the government takes up the responsibility for procurement, transportation and storage. These are undoable in most of India barring states like Haryana and Punjab which have a well-oiled government procurement network. FM Jaitley’s proposal for the Niti Aayog to consult with the Centre and states for a “foolproof mechanism” that ensures adequate prices to the farmers for their produce is bound to delay the announcement of MSPs for kharif crops. The farmers can only hope that these three institutions would be able to achieve a consensus before the sowing season starts. Similarly, the Rs 500-crore fund to protect the interests of potato and onion farmers is inadequate as logistics infrastructure creation requires much more serious investments.

It is not a generosity to extend loans to farmers who snare themselves in a debt-trap. Rather than patting itself on the back for hiking institutional credit for agriculture sector to Rs 11 lakh crore, the  government should urgently explore avenues for extending credit on the basis of produce rather than keeping land as collateral. A welfare state cannot allow banks to alienate farmers from the land and the farm equipment. It is good that credit to agriculture sector is sought to be extended to tenant cultivators also but the fine print is yet to take shape.

Although the Budget has left the 1.5 crore salaried class high and dry, a 10 per cent long-term capital gains tax on market speculators was overdue. The 5 per cent cut in tax liabilities of small and medium enterprises should help them counter the demonetisation and GST induced disruptions. They, in turn, are growth catalysts for the informal sector. But, the cut in corporate tax for India Inc. should have been matched by a phasing out of fiscal incentives. As India Inc. is looking to cut its workforce by taking to automation and artificial intelligence, tax incentives should have been restricted to job creators.

A year before the elections, it was brave of the government to eschew the temptation to spend with a free hand. But the schemes spelt out in the Budget require large doses of borrowings; some even lack a blueprint. Hence the government will be hard placed to realise its stated objective without creating fiscal disorder.