A Bits And Pieces Budget

It’s a bits and pieces Budget. A concession here, a burdensome tax there. The economic document that sets out how the government will spend and raise money over the next year has no central, defining spine to make it a ‘Big Bang’ statement. By now all the nuts and bolts have been uncovered by the dailies and their pundits; and though the corporate honchos won’t admit it, the general sentiment is a feeling of being short-changed.

If there is one thing that has ruined anything positive the Budget contained, it is the announcement that 60 per cent of the corpus and interest of the EPF will be taxed at the time of withdrawal. It has created a wave of negativity amidst the powerful, opinion-making middle-class. It is a folly the NDA government will rue in times to come. No amount of clarification will turn back the clock now. The government has said the provision only applies to 6 million of the 37 million EPF members who draw over Rs 15,000 per month. It has also said that there will be no tax if the provident fund is invested in an annuity to yield a monthly ‘pension’ income.

The Finance Minister is currently fending off a barrage of questions. Who is Jaitley to decide how and when employees should use their PF? It has always been used in times of crisis — buying a house, or handling a difficult medical expense. How dare the government restrict withdrawal to only the employees’ share of the PF?

On the other hand, one can’t say there is no direction and philosophy. The Budget’s focus is on the farmer and on addressing the rural crisis by increasing spends on irrigation, road building and by putting more money in the hands of gram panchayats to kickstart a somnolent ‘Bharat’. Rs 2.87 lakh crore will be given in grant-in-aid to gram panchayats, the MNREGA scheme to generate rural employment has got Rs 38,500 crore, the highest-ever in any budget, Rs 97,000 crore has been allocated for construction of roads to generate jobs and connectivity. The list goes on.

There is also a concerted bid to tackle housing. Private builders avoid the low- cost market because of thin margins. To make construction of homes for the poor attractive, some of the measures proposed are: (i) 100 per cent deduction for profits to developing flats up to 30 sq. mts in four metro cities and 60 sq. mts in other cities, (ii) Deduction for additional interest of Rs 50,000 per annum for loans for first- time home buyers, where the cost of the house does not exceed Rs 50 lakh; and (iii) Exemption from service tax on construction of affordable houses up to 60 sq mts.

The gamble of Jaitley is to get people to buy more, and consume more. It is the best way to crank up a slow economy. There is a serious crisis today. Despite the fall in petrol and diesel prices, car sales are flat, and there are thousands of apartments lying empty. But the problem of how to put more money in the hands of the people has not been solved. The saving on petrol prices has not been passed on to the people. Income tax collections have actually fallen. It shows a crisis of employment and under-employment.

Will the Budget solve these long-term issues? After you have finished with the incoherent bytes on TV and the quick fixes of the dailies, do sit back and absorb the cerebral analysis we have put together by authors who know what they are talking about.