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Dear Readers,

In the Union Budget 2018-2019, the BJP government has responded to the slogan and campaign of Former Prime Minister Late Shri Lal Bahadur Shastri “Jai Kisan”. In the Budget, Finance Minister Arun Jaitley has primarily paid attention to agriculture, floriculture, and other allied agri industries. Farmers will get one and half times more than the cost of cultivation for their Kharif crops. The government has failed to procure rice above 60 million tonnes and wheat above 40 million tonnes at Minimum Support Price (MSP). How would the government ensure giving one and doubling the price of crop? The Finance Minister is calling bamboo “green gold” under the restructured National Bamboo Mission. This measure along with new funds for fisheries and animal husbandry is commendable. BE has been bringing this factor and many related factors to the notice of the government and readers. Under Green Gold, the Finance Minister should have included ‘banana’, ‘coconut trees’, drumsticks, which require negligible water, but can be give substantial income to farmers over and above the price of cultivation. But, the concerns of farmers, especially small and marginal farmers, who have been affected by drought and flood, have not been addressed. These farmers are in serious distress. Some have even been driven to commit suicides. They need help during drought and flood. The government should conceptualize a Bharatmala-type canal and river networking project, which will be able to handle both flood and drought situations. The government claims that food grains production is 275 million tonne and horticulture products 285 million tonne. But why has the contribution of agriculture and allied services fallen to around 15% of India’s GDP? Why are farmers committing suicides? Why is there so much rural distress? To work for Jai Kisan, much better solutions need to be considered. This will also help in inclusive and sustainable growth.

The Finance Minister has promised the doubling of agriculture income in the next four years while The Economic Survey has predicted a downswing in agricultural income by 25%.

The announcement on Healthcare has been the highlight of this budget. While the decision to provide medical treatment coverage of up to Rs 5 lakh per person has been announced for the poorest 10 crore people is a welcome move, there remain quite a few grey areas regarding identification of the target groups, the quality of service delivery infrastructure available, the financing details of the scheme – especially when the cost of this scheme is to be borne jointly by both Centre and individual State governments. Also which all ailments are to be covered within this scheme must be clarified, or else a scheme like this will be prone to wanton abuse and corruption. Using the same money for providing affordable housing to the poor would have created much better positive multiplier impact within the economy.

Responsibility must be given to MPs and MLAs to implement this scheme in their areas within three months. Accountability can be fixed with wide publicity.

Employees, workmen, and employers have been contributing over 11% to ESI (Employee State Insurance Fund). Fund has surplus of over Rs 8000 crore. Conditions of most hospitals / primary healthcare centres (PHCs) under these schemes are pathetic. There is a perennial shortage of qualified medical practitioners and beds resulting in long waiting time for treatment. Hospitals/PHCs are also located very far. Liberty should be given to get treatment in any hospital and payment can be linked to ESI fund. Alternatively, stop these deductions. Save huge administrative costs. Legalise the issuance of insurance cover to employers
and workmen for ` 5 lakh and more, depending on factors like age and number of dependents.

Multiple surcharges in cess add to the stress of tax payers. These surcharges that have been collected are lying unutilised. Cess on account of education has accumulated over Rs 10,000 crore but remain unutilised. The government is also stressing on quality education. Some relief by way of increase in salary is proposed. This is not going to help. Ethics and values of teachers have to be understood. Vedic guru parampara will provide guidance. Vigilance has to be different than what it is at present. Had we quality education, our seven million students would not go overseas for education, draining precious foreign exchange to the extent of Rs 20,000 crore!

The middle class consists of different income groups. They are not only salaried persons and businessmen, but also the self-employed, those engaged in small businesses, small scale industries and provide services on chargeable basis. The services sector contributes more than 56% to the GDP. The service sector felt neglected in the Budget. They expected some relief to meet the increasing cost of living and slow economic growth, especially after going through the rigours of the demonetization drive and the switch to GST. Most families today have unemployed, educated youth - both boys and girls. The different sections of the middle classes had voted for the BJP in the last election with hope and faith that their pangs would be dealt with by the BJP. Unfortunately their problems have not been addressed properly giving them enough reasons to feel discontent.

The Budget is likely to revive infrastructure. Expenditure in public infrastructure projects would help private sectors’ investment. But first there needs to be a congenial environment for investors. Infrastructure-centric financial institutions can fill the void created by banks.

The capital market plays an important role in providing capital to small, medium, and large industries. Banks loans are not only costly, but loans are hardly available these days. Around 80% of corporate houses are burdened with heavy debts. Only recourse for them is the capital market where there is liquidity. Banks should also tap the large capital market overflowing with liquidity by offering equities at discounted price. The Budget’s announcement to impose a 10% long term capital gain tax, is one of the reasons for the sharp market correction post-Budget. Retail investors, senior citizens, pensioners are badly affected. Margin traders are worst affected. Real estate will be affected. Keeping in mind the limited avenues for resource mobilization presently, the LTCG should have been ideally delayed by a few years. Mobilising fresh equity capital will be difficult now. Bonds markets have also been affected. The RBI has put off auction of several bonds as there is now little incentive to stay invested for long term. Hong Kong and  Singapore  do not have tax on long term capital gains. This worked in their favour even after the global turmoil from the 2008 financial meltdown.

The government has stated that the recent fall in the stock market is part of a global phenomenon. The US and other global markets have also corrected. Stocks worth $ 4 trillion had got wiped out globally. Will this crash continue? Some experts say that this is not the time to panic; their advice is to remain invested. However, corporate earnings in India do not justify the steep rise that the market was witnessing. Weak fundamentals had been weighing upon the market. Some analysts feel that the correction was due.

Multiple taxes, surcharges, cess, government’s attitude, and fear psychosis have led to subdued investments. Instead of simplification of tax rules and by laws, these are being made more complicated and complex. It is beyond the understanding of common men, industrialists - small or middle or big. The RBI Governor Urjit Patel said that there are five taxes on capital, which obviously have an impact on investment and saving. Fiscal deficit target for 2018-19 is reset to 3.3% of the GDP against a target of 3%. Rising crude oil price and government spending spree will push inflation.

The government has not also allotted fund for combating global warming. At Davos, in the Global Economy Forum, Prime Minister Narendra Modi had spoken about the need to fight protectionism, terrorism, and global warming. But in Budget, there has been a hike in customs duty on select items. The government has not also allotted fund for combating global warming.

Assets’ values have been increasing but these do not reflect the fundamentals of the economy. Small investors are more at risk. Foreign portfolio investors have sold net $938 million worth of Indian equity.  The Federal Reserve Bank is tightening foreign fund outflows. This will have negative impact on the market. Bears have entered the market. They are trying to outsmart the bulls. The race is on.

Some relief has been given to senior citizens. But the same is not commensurate with the decline in the real value of rupees and especially in the context of social, radical changes. For instance, cases of children neglecting their parents are growing as they have their own problems and are fighting the circumstances marked by the decline in one’s purchasing power, under-employment and unemployment.

In the environment of low investment, slow global economy, increased stressed assets, increasing global cut-throat competition, reduction of corporate tax to 25% up to turnover of Rs 250 crore would not be enough. It’s just like wiping a few tears of the SME sector. To boost investments, depreciation of 75% should be given to fresh capital assets.

To conclude, Bharat’s economy and growth is caught in a whirlpool of legislations, taxes, rules, and sub-rules - leading to the unease of doing business, generating shadow money at all levels, unemployment, creating stressed assets and low investments. To build a glorious Bharat, there’s a need for hard work and pragmatic legislation. The messages of Lord Krishna (‘Do Karma with righteousness’) and of Swami Vivekananda (‘Work work hard till goal is not reached’) have to be ignited among the Bharatwasis.

May God bless our policy-makers with the wisdom so that we spend on the right schemes and programmes which will strengthen the social fabric of the country and ready our nation to pursue bigger glory in the coming days.

Dr. H. P. Kanoria