Options limited in this fourth Budget

With less than a week to go before the Narendra Modi government presents its penultimate budget to Parliament on February 1 for the fiscal year 2017-18, the Union Finance Minister Arun Jaitley appears to be satisfied with the finer details he had dovetailed into the budget when he posed for the traditional halwa ceremony! Now that the budget is prepared and is in print with more than a hundred officials from the North bloc cooped up in the Raisina Hill, there is no point in speculation as to what would be the contours and colors of this budget, considering the fact that the feisty Finance Minister has not had any memorable one in the past couple of years when he donned the role and responsibility of the ace man in the Finance Ministry. No doubt, the Modi government spared itself any ignominy of getting bogged down in corruption or scams even as it experimented with a great gambit of demonetising high-value notes that had accounted for 85 per cent of the country's notes in circulation and in an economy which is more than 90 per cent cash-driven.

Post-demonetisation, after the agony people of all walks underwent in standing in the queue to get their own money from the banks with the latter working only to cope with the currency exchange and deposits of the public, leaving their core areas pigeonholed or attended to in a perfunctory fashion, not much was happening in the economy after November 8, 2016. Even the Central Statistical Organization (CSO) came out with an advanced revised GDP growth of 7.1 per cent for the current fiscal not factoring in the demonetisation-induced slackness in activities in the real sectors of the economy.

But the ground level situation in the economy does portend a lot of uninspiring or utterly downbeat signals. Illustrations to this dismal state include the figures released by the Society of Indian Automobile Manufacturers which noted that automobile sales in December plummeted the most in 16 years in recent memories. This is at a time when India's small car experiment in Maruti ignited an insatiable demand for personal vehicles among the upwardly mobile and middle-class people over the past decade and two.

Even as demonetisation was putatively meant to make house cost affordable by ridding the menace of black money that was in full pelt in this domain, housing sales in October-December quarter of 2016 plunged by a whopping 44 per cent in the largest eight cities which is again a record of sorts in the last 16 years. Yet another barometer of sombre business operations emanated from the survey of the All India Manufacturers' Organization (AIMO), hosting small and medium units, which showed that revenue had plunged by 50 per cent and jobs by 35 per cent among its member enterprises. The fact that a lot of reverse migration from cities to the rural hinterland supervened because the latter people could no longer stay in urban conurbations for want of wages and lack of employment opportunities only reveal the implicit grim reality. This fall in productive employment has been documented by the Labour Ministry which had reported a spurt of around 20 per cent in demanded for relief employment of 100 days under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), institutionalised by the erstwhile UPA government which Modi lampooned in the run-up to 2014 General Election but adopted later on by hindsight! Reports are also rife to the effect that foreign investors had pulled out a humongous Rs 71,652 crore from Indian markets since November 2016, actuated by the combined influence of demonetisation and the concomitant slowdown in the domestic economy and the US Federal Reserve decision of hiking interest rate by degrees.

With the economy struggling to revive itself under the enforced slackness due to demonetisation that would leave its repercussions for at least two to three-quarters, what sort of gravy measures the budget could devise to spur activities in the economy? If public investment is to be stepped up as it had been the want of this government going by its immediate past records, how the resources could be gleaned without subjecting people to unduly harsh tax burdens is an open secret. It has been leaning heavily on non-tax revenue such as disinvestment and proceeds of the auction of natural resources including spectrum sales. In fact, the proclivity of the Centre to augment cess and surcharges on income tax and other Central taxes like Swacch Bharat cess, Krishi Kalyan cess which it is under no obligation to share with the States as per Article 270 of the Constitution is budgeted at a massive Rs 2, 51,481.23 crore for the current fiscal, as disclosed by the Minister of State for Finance Arun Ram Meghwal in a written query in the Lok Sabha on December 9, 2016. Probably with the GST deadline pushed to July 2017, the Finance Minister will have leeway to tap this for the next fiscal too till all the indirect taxes are subsumed into the GST.

Similarly the NDA Government, unlike the UPA government, did not dilly-dally on the disinvestment of the Central Public Sector Enterprises (CPSEs) as it was able to obtain Rs 24.349 crore in 2014-15 in its very first year and Rs 23,997 crore in 2015-16, though the target was Rs 43,425 crore and Rs 41,000 crore respectively. These targets excluded strategic sale target of Rs 28,500 crore for 2015-16. In the current fiscal against a reduced PSU disinvestment target of Rs 36,000 crore but an additional Rs 20,500 crore for strategic sale target, the government had netted Rs 21,401 crore and Rs 2096.35 crore respectively by mid-November 2016. So working on the twin track of 'minority stake sale' and 'strategic disinvestment', the pro-business NDA government does not suffer any socialist shibboleth of carrying on with the deadwood in the public sector. The forthcoming budget might see more such PSUs getting lined up for stake/strategic sales for fetching non-tax revenue unobtrusively. But the sale of the family jewels or even a part of it needs to be ensured at a remunerative way lest the government's expanding welfare programmes get adequate funding so that social upheavals should be obviated, if not obliterated.

With five crucial States going to the polls in the immediate aftermath of the budget, the agrarian agony needs to be addressed in a subtle way lest the farmers voting in most of these not well-developed States should be appeased. Already, the Prime Minister unveiled in December a raft of pro-farmer measures including easy access to loans from cooperative societies, providing RuPay debit cards to 30 million Kisan card holders and an interest waiver for two months for those who had taken a loan for their rabi crops from district cooperative banks.

With the Hobson's choice of appeasing the large swathes of the country's population post-demonetisation, the Finance Minister may well miss out on the big bang policy reforms for which investors, both domestic and foreign, would have a scant option but to remain sore and sulking.