Many are saying that the Budget 2024-25 is a bit lackadaisical. The appeasement of coalition partners is all too unabashed. Bihar getting a whopping Rs 26000 crore for highways and Andhra Pradesh Rs 15000 crore for development of new capital, Amaravati is too much in the face. But then, days of bashfulness in politics, is over.
This Budget, as expected, is more a political one than focused financially. Rather than ensuring that the economy rides on the success of India’s relatively better performance, compared to many nations, the Budget Exercise has been reduced to a balancing act of the multiple demands. As it is, FDI is not pouring in thick and fast. Also, India is still cautious about FDI from China. The Budget has tried to give some cosmetic, insignificant allocation to coteries. Readers will agree, Budgets of late, lack a signature, connecting thread but seem to be presented as standalone ones. Before we go to certain significant issues, we can observe the general lack of continuity. Let’s take up just one such issue: Capital Expenditure. in last Budget, increased Capex was announced, with much flourish, as the way to boost infrastructure, which in turn would bring economic prosperity. However, that fulcrum is lost this time.
The capex, target remains at Rs 11.11 lakh crore for FY25. Well, does it amount to admission of policy failure or lack of commitment from significant players? Surely one needs to have some persistence to achieve any goal. It’s known (now proven) that the optimism with which the Government feels, Private Sector will participate for Capex, does not happen in India. Time and time again, it has been proven that Private Sector will never commit Capex, unless it sees profits much beyond commensurate investment. So, would it not be worthwhile to explore ways of ensuring compulsorily Capex from Private Players? Let’s take the example of the recent unprecedented profits made by Private Players in the Oil & Gas Sector. The Russia – Ukraine War led to gargantuan profits for private companies. All riding on the Government’ sovereign policies, which defied sanctions. This certainly, called for quid pro quo, in form of national development by the Private Players. But it was obviously not forthcoming. So instead of windfall taxes, could it not have been directed that portion of the profit, to be rolled back into Capex, for Infrastructure development? Definitely, this was not asking for too much. Windfall Taxes are a kneejerk reaction of an Accountant not a Financial Planner. Some may say, India has to understand that more drastic steps need to be taken to forge ahead economically.
A section of Indian citizenry is going ga ga on limited perceived benefits. Although the common middleclass Indian is today an angry, albeit, despondent person. His lot is that of a step citizen, who is neither a part of any vote bank nor any partisan group. His lot is not to even ask why but to do and die! He is not an agriculturist, transporter, medical service provider, sanitation staff or even a shopkeeper who can, if even remotely affected, bring the government machinery down to its knees. There have been no changes in direct or indirect taxes for which the common man is supposed to be grateful. Interestingly, Angel Tax for investors has been abolished and the corporate tax rate for foreign companies are reduced from 40 percent to 35 percent. These are aimed at easing of business in India. But the StartUpers and Entrepreneurs have their own story to tell. The omnipresent Red Tape and ‘Returns’ regime remain. As for Income Tax, which is always of concern to Middle Class Salaried Workers; Income tax slabs have been relaxed for incomes up to Rs 10 lakh. Standard deduction limit for Salaried and Pensioners have been hiked to Rs 75,000 from Rs 50,000. Standard deduction limit for family pensioners are increased to Rs. 25,000 from Rs 15,000. Deduction on employer’s NPS contribution for private sector employees has been hiked to 14% from 10%. New Income Tax Slabs for FY 2024-25 would be as follows :
Up to Rs 3 lakh – 0%
Rs 3 lakh to Rs 7 lakh – 5%
Rs 7 lakh to Rs 10 lakh – 10%
Rs 10 to Rs 12 lakh – 15%
Rs 12 to Rs 15 lakh – 20%
Above Rs 15 lakh – 30%
But all this can be availed, if the tax Payer switches to the New Tax Regime. Therefore, one can see, it’s not purely a relief measure but more of a push for adopting the New Tax Regime. The benefits of Old Regime vis a vis New Regime may vary from individual to individual depending on revenue flows. Some of the benefits of Old Regime are: Wider range of deductions and exemptions, such as those related to investments, housing loans, and medical expenses. Significantly lower taxable income, leading to reduced overall tax burden. Specific tax benefits under Section 80C, Post Office Schemes, and other provisions. Standard deduction of Rs. 50,000 for salaried individuals. Tax relief on home loan interest for self-occupied or vacant property. Well, so much so for the relief to Salaried Tax Payers who incidentally form the bulwark of revenue for the Government.
Although, the FY24 Fiscal Deficit Target has been pegged at a lower 5.8 per cent, there is need to lower it further. The consumption pattern of the people has to be triggered by several means. The confidence building of the vast majority is important. Just lowering investment rates will not incentivize the middle class, at least, to spend. The push towards investment in Equity as suggested in the budget may run into difficulties once the bull run abates. The Indian Market seems to be focused on both foreign and domestic ones. The situation in the neighboring countries hardly evoke confidence in Indian investors. The immunity from volatility in the market has to ensured somehow by India. Mere size of economy where India is poised to get the third position surpassing Japan and Germany will not provide the Indian investor the succor it is looking for. For PLI Scheme, an allocation of Rs 6,200 crore for the Production-linked Incentive Scheme is proposed. The Scheme provides for: Scheme A. Direct Benefit Transfer: Will provide a Direct Benefit Transfer (DBT) of one month’s salary in three instalments, upto Rs 15,000, to first-time employees registered in the Employees’ Provident Fund (EPFO). Scheme B. Manufacturing Incentives.
This focuses on job creation in the manufacturing sector. Incentives will be directly provided to both employees and employers based on their EPFO Contributions during their first four years of employment. Scheme C: Employer Support. This Scheme includes support to employers, with reimbursement of up to Rs 3,000 per month for two years towards their EPFO Contribution for each additional employee hired. There is a huge issue of Pension which is linked to PF and otherwise. Despite Supreme Court having given judgement for increased Family Pension, under the Provident Fund Act, there is no sight of the concerned authorities implementing the judgement in its true spirit. The Old Pension scheme of Government is also a simmering issue. The Atal Pension Yojana has also not seen great response. Therefore, this type of PF based of ELI, i.e Employment Linked Incentive may not really galvanize the employers to give employment, nor employees to reckon it as a good employment incentive. This scheme may not be able to solve the complex problem of unemployment in India. As is well known, Indian Labour Market is very typical. There is rampant unemployment and underemployment.
At the same time, Employers lament the lack of requisite manpower. While the Private Sector Employers typically see Employees as a Cost Centre, to be dispensed with, at a mere dip in Profits or even rumors; PSEs traditionally have remained more invested in employees and willing to Re Skill employees during downturn. An amusing aside about what the PM had said about Unemployed youth and others, selling Tea and Pakoras, is that Indians who laughed at it, do not hesitate to Flip Burgers, Drive Taxis and Trucks in the West. India needs to get out of double standards of all types. Everyone needs to be educated on the dignity of labour. This also brings us to the Skilling Aspect. It was announced that a new centrally-sponsored scheme for skilling 20 lakh youth over the next five years would be brought in. It was also said that model skilling loan scheme will be revised to facilitate loans up to Rs 7.5 lakh. Now, Skilling of potential employees has been talked about in India for quite a while. Money has also been spent but the outcome is nothing much to talk about. Most Institutes have traditional Factory Type of Skills in mind.
The Government has not looked beyond certain skill sets and for them Beautician, Paramedical, Lab Technicians, Physio and such like Courses are something which are up-to-the-minute and ultimate. While not lowering their significance and the wisdom of concentrating on the bottom of the pyramid, why not think of what is more in demand today all over the world. What about 3D Printing Technology Skills, AI, Big Data, Advanced Robotics, Soft Skills, Flying, Space Exploration, Sports Technicians, Administration, Non Invasive Technology Skills, Eco Technicians/ Warriors, Paralegal, Running Municipality Skills etc.? These skills may be required in lesser numbers but have a huge demand and command much better salaries. Another factor is that if the Skill Institutes are to be run by Retired functionaries or those recommended by erstwhile buddies, rather than professionals, there will neither be respect for these institutes nor real value addition will be take place.
Coming to one small aspect of generating revenue to finance the Budget. The Finance Minister made a small, almost passing reference to monetizing of assets and quickly said its not about selling PSEs. Since the matter was said so casually, one needs to examine it carefully. Obviously it refers to the issue of monetizing and selling of PSEs assets. Now, many would say these assets are maybe NPAs or those not under much use. But pray who is to decide about the utility of such assets ? This is of utmost importance. Pressure can be brought upon liable heads of PSEs to declare some assets which can be disposed of. Any PSE can be forced to declare some of its assets as NPA or Not required. But what about its future use, what about the future projects inked up for their use? In the current situation, when Land Acquisition is so difficult for Industries, be it in Public or Private Sector, is selling off some parcels of land advisable? What is the guarantee that land when required by a Company, will be easily available? What about land swapping deals that can be resorted to in future? We know that recently a head of a Private Conglomerate was reported to have said that Land, Facilities etc. of PSEs should be made available for use by Private Companies and PNGRB should examine and facilitate the same.
Now facilities, everyone knows, can mean almost everything. The private players may seek to justify that a particular piece of land, storage facility, tankage, pipeline or equipment of a PSE, if not being used, should be handed over/ shared with a Private Company. Pray will the reciprocal also apply? If facilities of a Private Company are not being utilized will it be allowed to be used by a PSE? Will a Refinery with Surplus Capacity be allowed to be trolled for domestic product demands? I am sure then the question of absolute ownership, profits, first mover advantage etc. will suddenly come into picture. A PSE needs to guard against such moves of disposing so called assets which have been already monetized. If a vital competitive edge may go, then the PSE is bound to become noncompetitive/sick, ripe for easy picking in the market, or privatized on account of nonperformance. Then it may not even be expedient to look at sound reasoning, just cut the losses and quit. Very easy! But these are national assets. Before any such recommendation is made, for disposal of monetized assets, it should be mandatory that each and every deal is cleared by a JPC. After all, divesting of Capital Assets, for which the Government is apparently struggling to raise funds, even in the Budget, seems to be an enormous contradiction. Many in Finance Ministry are unable to find streams of revenue and look for easy outlets. The much hyped BPCL sale came a miss, still no one seems to have learnt a lesson. It was publicly told, by no less than a Cabinet Minister, that BPCL through its profits, could cover many times over, the estimated sale price. Such a PSE is a recurring source of flow to the exchequer. It other words, its highly profitable. Still one hears of Privatization and Divestment of PSE assets. Indian Citizens have witnessed what privatization does to a PSE company.
The famed Private Management Style is found wanting, be it the Hospitality Sector or Aviation. The private companies cite M&A issues, whereas many PSEs have succeeded in amalgamations, despite widely divergent technology & culture of the companies. There is utter disregard to the incumbent Human Resources, Safety and Ethical Principles by many private enterprises who but out PSEs. The most inhumane treatment of customers is witnessed and has to be tolerated. When competition is gone, it’s a sellers’ market and the Government can scant remove the miseries of the consumers. Many ask, if private business owners, especially the big industrialists, find it so difficult to run their businesses in India, and have a huge list of demands before any Budget, why don’t they take their fare elsewhere? Why is it that the PSEs are not permitted to have any expectations from a Budget? India has a stable government, big readymade market, huge demographic dividend, cheap manpower and increasingly better logistics; Government needs to leverage all this. Time has come for Indian Government to balance divergent viewpoints, be less dependent on the mandarins, consult specialized bodies in India & Abroad and drive a hard bargain. There are several aspects of the current Budget which have not been touched upon in this article. For this, I seek a fervent apology from the readers.
Time has come, when the common Indian citizen should become the core concern of every Budget. Today, as we all know, nothing can be taken as granted in the economic world. However, it’s the common man who stands to gain or lose the most. It is he, who has the greatest stake in any Budget. An Indian Budget therefore has to possess a soul and not become a mere lifeless document!- (By Sidhartha Mukherjee )
Disclaimer : The opinions expressed are personal
