One for the distressed

Kirit S Parikh
Chairman, Integrated Research and Action for Development, & ex-member, Planning Commission

THE Budget focuses on the distressed, the farmers, the poor, the lower middle class, the salaried and the elderly. There are very good proposals to push farmers' incomes. An assurance of output prices that are 50 per cent above the cost of production provides income security. Of course, how effective the mechanism to provide assurance works is to be seen. One of the main obstacles to farmers getting fair price has been the requirement to sell produce in organised market to recognised agents (arhtiyas). The proposal to set up many Grameen markets where farmers can sell their produce to anyone will improve farm income. Also, the promotion of farmers' cooperatives, that buy inputs and sell outputs, through tax exemption will reduce the cost of inputs and help get better price for output. It will also facilitate diversification. Production of vegetables that are more profitable will be encouraged through "operation green" on the line of "operation flood" that kicked off the "white revolution". 

The promotion of solar pumps with the assurance of purchase of surplus electricity by a local power distribution company can provide farmers steady income and encourage them to reduce withdrawal of groundwater which is often overexploited.

The Budget has promised to provide social security to the old, women and divyang. It proposes to provide up to Rs 5 lakh to cover the hospitalisation expenditure of 10 crore families. Medical expenditure often pushes people below the poverty line and causes long-lasting distress. The FM also said that this is a step towards universal health coverage. Also promised is nutritional support to TB patients. The government is to establish 24 medical colleges in hospitals.

Salaried taxpayers and senior citizens are provided larger deductions for transport and medical expenses. Seniors' tax exemption bank interest limit is raised from Rs 10,000 to Rs 50,000. Also, expenditure up to Rs 50,000 for health insurance and medical expenditure is made deductible.

Quality education is the most important investment in people for future employment. The Budget promises to improve the quality of education. Though how this will be accomplished is not elaborated. The education cess in income tax is raised from 3 per cent to 4 per cent.

Does the Budget stimulate growth?  

There are a number of measures that could raise growth. A substantial step in expenditure on infrastructure, roads, railways, airports, affordable housing, Sagarmala, etc would provide the stimulus. Reduction of tax rate to 25 per cent on small and medium enterprises with a turnover of less than Rs 250 crore will make them more competitive. Also, venture capital funds are provided incentives. Such funds play a very important role in the USA in promoting start-ups.

To promote employment, the Budget proposes to subsidise emoluments of new employees for three years, tax rebate for wages of new employees for three years and sharing of basic training cost.

A tax of 10 per cent on long term capital is introduced. Such tax is levied in most countries. Would it lower investment? It is not likely as there is already a lot of money chasing financial assets and stock market will continue to remain the preferred choice for many.

Would all these outlays increase inflation? Would it raise the price of food? 

The target of 3.2 per cent of GDP is not met and the revised Budget shows it to be 3.5 per cent for 2017-18. This is not inflationary. However, if the measures to increase farm incomes raise the consumer prices for food, inflation may creep up towards the end of the year.

• On the whole, I give 8 out of 10 to the Budget.