Tuesday, May 28, 2024
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Budget – a welcome change Both practical and realistic!

Dr A K Ramdas
It would take a few months more, post monsoon, to know the real effect of the 4th Budget presented by the Finance Minister, Arun Jaitley. Yet, it is a welcome change to high taxes of the past; it is both practical and realistic.
However, the pace for this development was actually set some three months earlier by the introduction of Demonetization of high value currency notes. I think this was well planned, but regrettably poorly executed, prelude to this budget which has brought about major changes that would benefit one and all. It is therefore necessary to look at Demonetization to feel the impact on the budget.
With a strong will and with a view to eradicate the black money evil, Demonetization was announced. It is an unfortunate story that the Government was ill prepared to make sufficient ground preparation for keeping ready small change as a stand-by, including calibration of ATMs, that caused untold misery to millions of people all over the country. In the past, most people did not have access to banking, in spite of many schemes that the Government had introduced, and these common people were holders of high value currency notes as “safe savings”, instead of small value notes.
Anyway, according to various reports appearing in the press, about 86% of the high value currency notes have now been recovered, and are deposited with banks; a certain percentage of these high value notes have probably found the way to be deposited in temple collections (Hundi) and some will never surface, being destroyed by the hoarders.
However the Demonetization effect is that this will greatly reduce the rampant bribery that is at the bottom of the illegal hoards of black money. Press reports also indicate that legal action by Tax sleuths will follow on some 1.8 million accounts who have become “rich” overnight by illegal and unaccountable deposits!
For the Government, post Budget, it would be worthwhile examining if these hoards can be “permitted” for use in “infrastructure” development that the country needs so badly! Finance Minister will now have to seriously look at these Cooperative Banks that that received enormous amounts of deposits. Most banks are now flushed with deposits and it is hoped that these will be put to developmental use.
Now a look at the Budget. Reduction in personal income tax is a definite relief; so is the relief for firms with less than Rs 50 crores turnover. Individuals will also feel that lower tax would put more money in his hands that will spur consumption. The second major benefit that may accrue due to change in the affordable housing sector. Loans would become cheaper because of their getting the “infrastructure” status.
This Budget speaks a lot of Government’s positive and committed approach towards creating a stronger and a balanced economy. One must remember that it has taken decades of decay in building up the parallel black money economy which cannot be wiped clean overnight by a single Demonetization process. To bring this country to a cashless digital format, it would take not less than 3 to 5 years for a start. We must remember that, basically, India has been a high value economy and it is only now a greater number of people are getting access to banking and the resultant benefits of digital mode of payments. In the long run, one can expect a definitive advantage if and when polymer currency notes are introduced to replace paper currency and wider use of digital modes.
By the time the Budget is approved, some changes are inevitable. The Government may be encouraged to increase public spending; simplify the tax returns; introduction of GST by July will eliminate a number of State and Central taxes and the overall approach to job creation augur well for the Indian economy.
The Government will need to take the cue from the American President, Donald Trump, who has began to act on what he repeatedly claimed: “America First”! It is time that Modi Government also follows suit and say “India First”, supplementing the efforts of “Make in India” approach by ruthlessly stopping imports of a great number of items that the Captains of the Indian Industry have been demanding, as these hurt the domestic industry. There is no sense, for example, in importing tyres and tubes, which can be made in India. We must import what is not made in India. It does not make any sense to import sugar either, for that matter.
A lot of Chinese goods are being recklessly imported by greedy merchants. All these areas need the Finance Minister to either completely ban imports or impose exorbitant duties to make imports unprofitable. We need to build our industry; we need to generate more employment in the country rather than doing this favour to China.
Finance Minister would do well to look at these areas where our hard earned money is being spent needlessly at the cost of our own development.

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