For quite some time, it was clear that the two successive droughts, resulting in widespread rural distress, would demand the government's attention. That Bharat (rural India) would be given pride of place was indicated by the PM Modi as well as others. Agrarian Bharat is an inescapable reality that we cannot ignore or run away from.
This was a defining budget in that right wing forces in Indian polity have chosen to grab centrist space. By taking the exact same position that the Congress took, the BJP and Congress at least in the nature of the welfare economics that they are pursuing have become indistinguishable. The Congress very smartly used the three pronged cover of the farm loan waiver, MNREGA and Forest Rights Act in its first avatar to storm the hustings in 2009 and grabbed 206 seats. Now the BJP, just short of two years in power and badly brutalised after the Delhi and Bihar assembly vanquishing, has taken a similar left turn. The Congress thinking predicated on deep set socialist moorings was given a fillip when the 2009 results proved that the bottom of the pyramid was where the Indian voter vested. In its second essay, UPA tried to refocus on social sector schemes, enlarging the scope of dole economics, but was crippled by rampant corruption which left the middle class alienated. Corruption like a creeping virus exposed the soft underbelly of the Congress against a tireless Modi.
The BJP came to power on the back of a double anti-incumbency wave, the freshness and gusto of Narendra Modi and his promise of growth and development. But, delivery has been found wanting on the fistful of promises, and jibes of suit boot ki sarkar have eroded the BJP's enormous equity in the first flush of seizing power in May 2014. The decisive defeats in Delhi and Bihar have convinced the party leadership, and perhaps the Sangh itself, to manoeuvre towards the centre. The opportunity came with Bharat's litany of woes, a catalogue of farmer suicides and recurring pain and shame across agrarian India. This has resulted in a perfect marriage of a new BJP stratagem to move towards the left. Ergo, the gargantuan rural and infrastructure package unveiled in the budget. And mind you, a huge Rs 38,500 crore allocation for the shining 'monument of UPA's failure -- MNREGA. Vote bank economics has unfortunately trumped real economics. There is no reform signalled in this budget nor is there any articulation of the BJP's own economic vision. However, I did like the 'pillars' of the neo budget and the way Arun Jaitley spelt them out in a refreshing break from the past.
But the left turn doesn't end with the rural outreach. It is little things like targeting the well heeled -- so 12 per cent surcharge on income of over Rs one crore per annum has been enhanced to 15 per cent, additional tax at the rate of 10 per cent of gross amount of dividend will be payable by the recipients of dividends in excess of Rs 10 lakh per annum, excise duty levied on ready made garments and gold jewellery, a morally corrosive compliance window for tax offenders at 45 per cent taxation, including immunity from prosecution, tax to be collected at source on purchase of luxury cars exceeding value of Rs 10 lakh and purchase of goods and services in cash exceeding Rs two lakh, securities transaction tax on options increased from 0.17 per cent to 0.05 per cent and penalty rates to be 50 per cent of tax in case of under reporting of income and 200 per cent of tax where there is mis-reporting of facts. Then there is one more cess - non creditable infrastructure cess - 1 per cent on small petrol, LPG and CNG cars, 2.5 per cent on diesel cars of certain capacity and 4 per cent on other higher engine capacity cars and SUVs. These essentially translate into the fact that the well to do need to cough up tax revenues to channelise nation's growth. The subsidies for the well to do under attack, conforming with BJP's new left leaning moves.
There is a definite strategy in place where the BJP/Sangh is slowly but surely gravitating to the more accommodative centrist space of the vector. The BJP in its quest to make India Congress mukht has lost momentum after the Bihar drubbing. Majoritarianism which had worked well for it with the aggregation of the Hindu vote behind Modi during the Lok Sabha polls suddenly reverted to its unruly caste calculus ways when it came to Bihar. The Grand Alliance (Maha Ganthbandhan) built on its caste arithmetic trounced the BJP. Delhi too was expected to see those residing at the bottom of the pyramid to vote for Arvind Kejriwal's AAP, but in a shocker, pretty much everyone across the spectrum voted for AAP in a veritable landslide. Between the undeniable rural push and massive outlay for roads and highways, an uptick in rural consumption should be visible towards the end of this calendar year. It is imperative that the rural economy perks up again for as we have seen in the past, tipping point with GDP data comes only when the rural numbers stack up. Moreover, rural consumption has to get a leg up.
Though the amount earmarked for bank recapitalisation is a meagre Rs 25,000 crore which is a trickle given the humungous size of the NPAs, a big positive, as V P Shetty - Executive Chairman , JM Financial Asset Reconstruction Company Pvt Ltd. Explained, is that the budget has addressed a long standing demand from the Asset Reconstruction Companies (ARCs). Enabling sponsors will be allowed to hold up to 100% stake in an ARC and allowing 100% FDI in ARCs through automatic route will also open up avenues for ARCs and facilitate them to strengthen the capital base and effectively participate in the huge NPA market in India. There is also an attempt to increase the depth of the Security Receipts market by allowing non-institutional investors to invest in SRs and removing the 10% investment cap in each scheme of SRs for Foreign Portfolio Investors. The budget also provides clarity on taxation in the hands of Trusts set up by ARCs and confers a pass-through status to the Trusts. Bank recapitalisation needs additional funding and this may come off budget.
I am leaving you with some of the nuggets in the fine print that continue to reveal the draconian mindset of babudom:
For the officers, by the officers and with the officers
In case of Customs, Excise and Service Tax, the present provisions require that a Show Cause Notice (SCN) must be issued within six months and in case this period is to be extended, the party to the case must be given a chance to oppose the extended period. Since officers want to keep the Damoclean sword hanging, the period of SCN has been extended, (and you better believe this) to two years in Customs and Excise and 2 1/2 years in Service tax. This is a most perfidious provision. The party case to case shall perpetually be kept hanging and his papers seized till Proper Officer is satisfied or otherwise.
The budget best exemplified by increase
1. In duty on Balloons from 10% to 20%. Wonder how many balloons are imported to warrant such harsh treatment.
2. Basic customs duty on golf cars <8703> is being increased from 10% to 60%. Bizarre.
Following controversy of makemytrip arrest case, arrest powers now only if tax has been collected but not deposited.
Bonanza budget for officers, with wide discretionary powers restored.
Difficulty of Doing Business
A number of Customs notifications issued on the Budget day specify actual user condition.
Chapter 28: 1) Actual user condition is being prescribed on concessional imports of phosphoric acid for the manufacture of fertilizers. S.No.151 of notification No.12/2012-Customs, dated 17th March, 2012 as amended by notification No.12/2016-Customs, dated the 1st March, 2016 refers. 2) Actual user condition is being prescribed on concessional imports of anhydrous ammonia for the manufacture of goods falling under Chapter 31 for use as fertilizers. S.No.152 of notification No.12/2012-Customs, dated 17th March, 2012 as amended by notification No.12/2016-Customs, dated the 1st March, 2016 refers. 3) Basic Customs duty on aluminium oxide <2818 20 90> for use in the manufacture of Wash Coat (3824 90 90), for catalytic converters is being reduced from 7.5% to 5% subject to actual user condition. Notification No.12/2012-Customs, dated 17th March, 2012 as amended by notification No.12/2016-Customs, dated the 1st March, 2016 refers.
Basic Customs duty on Polypropylene granules / resins <3902> for the manufacture of capacitor grade plastic films is being reduced from 7.5% to Nil, subject to actual user condition. Notification No.12/2012-Customs, dated 17th March, 2012 as amended by notification No.12/2016-Customs, dated the 1st March, 2016 refers. 2) Basic Customs duty on Super Absorbent Polymer (SAP) <3906 90 90> for manufacture of goods falling under heading 9619 is being reduced from 7.5% to 5%, subject to actual user condition. S.No 242 of Notification No.12/2012-Customs, dated 17th March, 2012 as amended by notification No.12/2016- Customs, dated the 1st March, 2016 refers.
The author is a senior journalist and commentator based in New Delhi.
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