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| FM has struck right balance | | | Swapan Dasgupta | 3/3/2015 12:42:44 AM |
| In the mandatory interview to the media he gave
after the presentation of the Union Budget, Finance
Minister Arun Jaitley made, among other things, a small confession.
Ideally, he said, he would have liked to have reduced Corporate Tax to 25 per cent this year itself, instead of phasing out the reduction over the next four years. Maybe, the tight fiscal situation didn't permit him the luxury of taking chances. It is also possible that in the battle between 'Make in India' and good politics, the latter consideration prevailed.
In hindsight, however, the Finance Minister took a wise call. The need to make Corporate Tax rates in India as competitive as countries in South-East Asia is necessary. However, had Jaitley taken the plunge in his Saturday Budget speech, it is entirely possible that the whole exercise would have been overshadowed by a completely spurious debate over an allegedly "corporate Budget."
In a land where public discourse is often shaped by compelling sound bites on television, it may have been hard for him to explain the apparent iniquity of a Reliance Industries paying a lower rate of tax than an average middle class salaried individual. After all, popular politics cannot accommodate scholarly explanations of the Laffer curve.
As it happens, the overall reaction to a Budget that was marked by a high measure of responsible incrementalism was entirely positive. At a time when the BJP is being pilloried by the alliance of Left, NGOs and the ever-slippery Jairam Ramesh for being 'anti-farmer' in the changes it plans to bring in the Land Acquisition Act - arguably one of the most regressive legislations to have passed Parliament in recent times-the Government had to be extra - cautious about optics.
Every Budget has an economic and political context. A Finance Minister who looks at one without addressing the other runs a huge risk of presenting one more rollback Budget - remember what happened to former Railway Minister Dinesh Trivedi when he looked at one without looking simultaneously at Mamata Banerjee. Jaitley can today be comforted by the knowledge that he has addressed both constituencies and left no one entirely dissatisfied.
The Opposition has found it difficult to be seriously critical. The only real note of dissatisfaction during the Budget presentation came over the selection of heritage sites for special attention - an objection that melted away once the Finance Minister announced a dose of extra assistance for West Bengal and Bihar.
Mercifully for Jaitley, the pressure to present a freebie Budget was non-existent. What distinguishes the BJP from the Congress is not merely that they have different 'core' constituencies.
The BJP believes in giving a helping hand to make every Indian productive; the Congress, on the other hand, combines a celebration of poverty with charitable donations that may or may not reach the intended beneficiary. The BJP sees the State as just one instrument of statecraft; the Congress worships at its altar.
It is important to recognise the inherent differences of temperament and approach.
The Finance Minister devoted the first half of his Budget speech drawing the architectural outlines of a welfare system that involved significant amounts of State subsidy.
What distinguished it from earlier approaches was that each scheme of pension or accident insurance - elements of what the Finance Minister described as a "universal social security system" - is a State-citizen partnership.
The token contribution that is to be paid by the intended beneficiary may seem of no consequence. However, this symbolic financial contribution will establish a proprietorial stake of the individual in what would otherwise have been a State-run entitlement prone to inefficiencies.
In establishing the parameters of a social security and welfare structure, the Budget has introduced an element of choice. The Employees Provident Fund and the medical scheme ESI were, for example, run with exemplary inefficiency. T
he individual contributors in fact regarded these deductions as another tax. By allowing individuals to opt out - without compromising the contribution of the employer - the Budget has conceded the right of people to choose their own financial instruments rather than bow to the dictates of a cruel, nanny State. I am sure that this scheme will be resolutely opposed in Parliament by the Left and those inclined to a statist perspective.
To me, what is important about this Budget is not merely that Jaitley has acted on his assertion earlier this week that popular interests and corporate interests shouldn't be seen as being inherently antagonistic. The promise to do away with the regulatory jungle that has replaced the licence-permit - quota raj will probably be regarded as bad news for the reinvented class of intermediaries who sit in exalted judgement over issues where they have no stake.
But since a business and entrepreneur-friendly environment is a precondition to growth, prosperity and the success of the Make-in-India thrust, the Budget has rightly devoted disproportionate attention in brushing aside many of the accumulated cobwebs.
The criticism that this wasn't a Big-Bang Budget needs to be addressed. Political experience seems to suggest that India, with its ultra-democratic temperament, is inclined to favour an incremental approach to radical ruptures. The need to take as many people as possible with you may not be a compulsion in China but it is obligatory. At the same time, consensus-building without a clear sense of direction has proved a national disaster. In this Budget, Modi and Jaitley have just about achieved the right balance. Hopefully, this will be followed by energetic implementation. Yes, there will be opposition but no opposition can withstand arguments based on the right instincts.
( Courtsey@daily pioneer.com) |
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