Budget Blues : Shop Keepers Government Ditches Salaried Class and Abdicates High Growth

Budget Blues : Shop Keepers’ Government Ditches Salaried Class and Abdicates High Growth

Rajiv Upadhyay

The Stock Market gave a true reflection of the people’s reaction of the crashed hopes of the people  by a drop of thousand points in the sensex . By presenting a routine , uninspiring and directionless  budget, the government in spite of its brute majority in parliament, just abdicated the responsibility of pulling the nation from lowest economic growth rate of decade . No step outlined by finance minister Nirmala Sitharaman will help the country in stimulating the demand or help in restoring growth to seven percent ( old Vajpayee 5.5%) level which is the bare minimum the country needs . Attempt to tax NRIs, say welder in Dubai, with totally different expenditure levels , will be as disastrous as demonetization .In spite of all the two and a half hour budget talks, the failure of the government on economic front is stark with the last quarter growth rate of just 4.5%. By her long speech in the parliament she only exposed that the government is clueless and therefore can give no solution to the myriad problems faced by the economy . It is such a contrast to the courage displayed by PM Modi in political fronts .

It is a “Pakoda walas” shopkeepers government and has always hated the educated service class . In the first budget Jaitley had promised that he will give more relief in income tax when the government has more money . The two Direct Tax reform committees too gave similar recommendations but ignored . The Tax revenue since then has doubled but government keeps ignoring hurting the salary class more and more . In this budget by presenting the new marginally lower six tax slabs with zero exemptions   the government has irresponsibly abandoned the tradition of saving oriented budgets promoted by the past governments which encouraged people to save more . After ending the pension scheme, savings are vital to survival in old age . But now the government , just like selling the family silver like Air India, is encouraging people to abandon savings and promote consumption . It will only spoil the life in old age . Pension/Salary class was getting  Rs150000 deduction on PPF etc in 80c , Rs50000/- standard deduction , 50000/-deduction on bank interest , house loan interest deduction , medical insurance premium deduction, no tax on dividend . By opting for new scheme old pensioners and service class will lose heavily . It can choose to remain in old scheme for the time being but there will be no relief for them while the vegetable prices etc are going up rapidly . Ultimately the old scheme will be abolished in the name of rationalization .The government does not recognize their contribution nor cares for them and is only protecting the interests of the traders and poor farmers for vote bank .

The defence budget with just Rs.3500/ 10000 crore increase in capital acquisitions , will serve no purpose in view of the depreciation of Indian Rupee and heavy arrears of modernization  . The defence acquisition is also being constantly ignored . Instead of reducing the army armed police should be reduced and older soldiers used in special armed forces units  till 58 years to reduce the pension burden .The large infrastructural expenditure of the government is no real  solution because the government construction is always inefficient due long gestation period and  high losses due to corruption . In the last six years, heavy expenditure on roads , ports etc might have saved the otherwise collapse of the economy but it has not really filled up the gap caused by the low private investment . In absence of real growth demand has evaporated . In its absence there can be no increase in private investment . Demand is really generated by the middle class and medium and  large farmers . Both these categories are neglected and ignored by the government .

Budget is balanced and has tried to tackle many areas admirably .Some of the new government schemes like new hospitals , digital India etc are good but they are too small for salvaging our sunken economy . FDI is being used for budgetary support and meeting current account deficit and is not giving the expected benefit in job creation. Exports are stagnant for the last five years and are not likely to go up in a hurry . Irrigation and agricultural growth are needing big investment and in its absence will not fructify as no new green revolution is in sight .  So there is no easy path for quick come back of big growth of Manmohan / Vajpayee era.

But when things go tough the tough get going . A Roosevelt or Deng or even Manmohan or Shaukat Aziz can bring back high growth in four years . PM Modi has the courage but  does not have the knowledge of macro economics . Babus surrounding him are just ignorant, pompous ,windbags . RSS/Swadeshi idealogues too are not capable of ushering rapid growth . The only person with credible solutions is Dr Swamy . PM may at least give him command for some time .

It will be a tragedy to let this period of rare political stability go waste as India may not get it back in a hurry .