Jaitely’s Dilemma
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| Familiar Photo Ops or expect some Good News for the common man? Lets wait and watch |
According to media reports, Arun Jaitley has invited economists and business representatives for
consultation just before sending his budget papers for printing.
This is indicative of the fact that Jaitley
is on the horns of a dilemma. Despite several
government steps since assuming office, including goading RBI to cut
rates, to push economic growth,their
outcome is very modest. It is pertinent to quote a nugget from the official Mid-Term Review of the economy : ‘the remarkable thing
about 2015-16 growth performance is that it continues to be as strong ( about
7%) as it is, given the weakness of exports ( because of weak world markets)
and private investment’.
The Review has identified two intractable
problems: One is that the global trade is declining and most economies-,China,
Japan, Europe are on the decline. The US economy is barely growing. The latest
Economist magazine says that world leaders are running out of options in fighting
global recessionary trends.As a result, Indian export earnings have
declined.
Second, the Indian private sector is not investing, as there is external and internal demand contraction. Most
companies are heavily indebted and finding it difficult to service their debts
due to low earnings. This is having a cascading effect on banks.
This has complicated budget making. Simply
put, only government can create demand by making huge investment
in infrastructure and other projects. But a low performing economy is accompanied by
low government revenues. Against this background, the captains of industry are
urging the government to cut taxes and
offer incentives to spur private
investment. Both the measures would result in further worsen the revenue picture. The Mid -Term Review clearly
spells out the difficult choices before jaitley. If the latter were to opt for
higher government investment, that could come only from borrowing or deficit financing. But under the
Fiscal Responsibility Act, the finance minister is committed to bring down the
fiscal deficit to 3.9 or lower. This is
known as fiscal consolidation. If
jaitely were to cross this Laksman Rekha, and opts to spur growth from public
investment out of borrowed money, would it also spur inflation? The retail
inflation, particularly of food items, is climbing up.
The other big worry is that the economy is
not creating enough jobs to absorb almost a million youth entering the job market every month. If the government were to stick to its fiscal
consolidation promise, and not make big
ticket investment, this will have an adverse effect on the job market. That is
a recipe for youth unrest.
All in all, Jaitley finds himself between a
rock and a hard place.
Perhaps he had made up his mind to jump the
fiscal deficit commitment in the fond hope of acerbating growth. The last
minute consultation is a bid to gain advance endorsement for his growth push.
- S Narendra
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India currently is the second largest telecommunications market in the world and there is a consistent growth in this sector, given the kind of growth and investment this sector is seeing it definitely needs attention from government, the current move to adapt GST on the policy front is commendable and these new regimes will have more impact on telecom sector.
Tax incentives and holidays for Research and Development, Manufacturing in Telecom sector from the government will be a welcoming move again.
- Atul Jain, COO, Le Ecosystem Technology India Pvt Ltd.
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Of taxes and death!
The other day, I read this anonymous quote: Death and Taxes
are certain, but dearth does not come annually.
It has become fashion for all political parties, particularly
when they are in opposition, to talk about reducing the personal taxation
burden. It’s like what Mark Twain said: Everyone talks about the weather, but
no one has done anything about it.!
The common man is made to suffer silently and among this
lot, the salary earner is the easiest goat for any government – tax them, tax
them and keep taxing them.
It does not require a great economic pundit to tell you
that if you leave some money in the common man’s pocket, he would only spend!
So, why couldn’t the successive finance ministers reduce tax burden and allow
people to spend more?
India seems to be the lone country (or among the few) in
the world where you are taxed for earning as well as for spending!
I request the FM to allow some tax concessions to the
middleclass and allow them to enjoy life! After all, you are taxing us on
spending as well, right?
The Economic Survey doe not present signs of any exciting
budget. But will the FM do some Jugad in an year where couple of Assembly
elections are due?
I am keeping my fingers crossed!
-
BNK
