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Budget 2017 | Evaluation: Well Done Minister, But ...
Team BW Businessworld takes a closer look at four areas that deserved more attention, and innovative thinking in FM Arun Jaitley’s Budget
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Back in 2013, even sceptics and die-hard critics sat up and took notice when Narendra Modi delivered a speech at Sriram College of Commerce in Delhi. As students applauded his witty remarks about a glass being half full or half empty, India realised it might just have found the next Prime Minister. It is 2017 now and genuinely non-partisan observers and analysts are still wondering if the glass is half full or half empty. This dilemma has become even more acute after the fourth Union Budget presented by Finance Minister Arun Jaitley.
Ignore the verbal jousts at television studios where Modi fans and critics habitually cross swords. Forget also the obsession with numbers, minutiae, sops and tax reliefs that are the hallmark of post-Budget analysis in the immediate aftermath. They ignore the big picture. But delve deeper and one realises how Jaitley might just have failed to do so much more that he could have done to power the Indian economy towards a higher growth trajectory. Team BW picked up a magnifying lens and started digging deeper into the Budget documents. At first glance, there is simply no doubt, that Arun Jaitley has done a good job. He has resisted the temptation of being either a modern day Che Guevara or an Ayn Rand. Like a benevolent uncle, he has doled out a bit for almost everyone. But a closer look does throw up four areas that simply haven’t got the attention they deserved: education, health, banking reforms, and ease of doing business, particularly related to tax administration.
Demographic dividend is a mantra that Modi chants often. Even Jaitley talked about it in his Budget speech. But look closer at the roadmap the Budget lays out for the education and health sectors and you have to be disappointed. The malaise is not confined to just this Budget. Even the earlier three Budgets haven’t done anything substantive, innovative or game-changing when it comes to delivering better education and healthcare. Says Satya Narayan, founder and chairman of Career Launcher, “I am disappointed at the lack of substance when it comes to the coverage, clarity, initiatives on anything to do with education”. The founder of Medanta Hospital, Naresh Trehan, is equally critical of the lack of attention to health when he says, “On the healthcare front, nothing significant was announced, except two new AIIMS to be set up in Jharkhand and Gujarat. No medical reforms, nothing for below-poverty line patients, only some sops for senior citizens.”
This visible negligence of education and health is mystifying given that Modi is publicly committed to ensure that the youth of India reap the benefits of demographic dividend. Sure, both happen to be subjects controlled by State governments. But even admirers of Modi expected more. The fact is, India’s pathetically low ranking in the Human Development Index will not improve without access to better education and healthcare. It will also adversely affect all vital missions and schemes. And yet, hardly anything is there beyond rhetoric and some promises.
The Economic Survey clearly points out to the “Twin Balance Sheet Problem” while analysing the crisis in the Indian banking sector. On the one hand, banks face an unprecedented NPA problem. As a result, they are not able to lend money to private investments to revive. It is becoming a vicious cycle as credit growth has actually entered negative territory in recent times. The third quarter results of ICICI Bank show that even private sector banks are badly affected. The Economic Survey estimates that gross NPAs of banks are in excess of 12 per cent, an unacceptable and unsustainable figure. Some years ago, the then RBI Governor, Raghuram Rajan, had announced stern steps to tackle the NPA crisis. It was hoped that the worst would be over by the end of the fiscal 2016-17. That’s not happening.
Many were hoping that the Budget would announce some innovative and out-of-the-box solutions that could exorcise this haunting spook. Unfortunately, all that Jaitley did in his Budget speech was the bland announcement that Rs 10,000 crore has been set aside for recapitalisation of banks. As an after-thought, he added that more funds would be provided if required. But that’s peanuts. Gross NPAs are officially in excess of Rs 5 lakh crore. The actual figure may be much higher. Reform supportive analysts and economists were hoping that Jaitley would announce a gradual privatisation process of public sector banks that would minimise the possibility of political interference and cronyism (of the kind now clearly visible in the Vijay Mallya and Kingfisher case). But no forward step has been taken. That’s just postponing the trouble.
And then, there is the much hyped effort at improving India’s position in the ease of doing business rankings. No doubt, a lot has been done on this front. But the efforts seem sporadic. Take the rankings of various Indian States. There was a lot of hype when this initiative was announced and launched in 2015. Then again, once the GST is implemented and the initial glitches and teething problems are resolved, there will be a big impact on the ease of doing business. And yet, when the Word Bank released the Doing Business rankings, India was still way down at number 130.
One of the most distressing rankings when it comes to individual parameters is paying taxes. India ranked number 172, just as it had the previous year. In plain language, this simply means that hardly anything concrete has been done to completely overhaul and revamp the tax system and administration in India. In this Budget, Jaitley has promised a simple, single-page tax form. But he has been promising a vastly simpler tax structure in every Budget since 2014.
Just one line from the speech delivered by Jaitley indicates how far we need to go in revamping tax administration. Jaitley promised in his speech that “the time for completion of scrutiny assessments is being compressed further from 21 months to 18 months for the Assessment Year 2018-19 and further to 12 months for the Assessment Year 2019-20 and thereafter.” Imagine, we are living in the digital age and it still takes almost two years to complete scrutiny of tax returns!
No Budget can ever be perfect; no finance minister can satisfy everybody. Given that, this one has some excellent initiatives, like doubling the allocation for Mudra loans, five per cent tax rebate for MSMEs, a big push to Skill India, creation of durable assets under the MNREGA and much more. And yet, there is this niggling feeling that Jaitley has missed out a historic opportunity to try and transform education, health, banking and tax administration. There is every chance that this apparent negligence could cost the economy dear — and Jaitley and Modi too.