Budget shouldn’t disappoint as economy is on an even keel

THE Union Budget looks ahead for several key pointers: signals for key sectors of industry and agriculture; public investment in foremost infrastructure sectors like electricity, roads and railways; how the fiscal scene (the government's own finances) is likely to fare during the year; and, of course, the average citizen’s keenness to find out if the income tax burden will go up or down.

With inflation under control and growth going steady at 6 per cent plus, there is no serious concern over the economy and the tax collection. There are, however, some imponderables. Will we be able to keep buying Russian oil at a decent price with US sanctions being tightened?

But the overarching concern and the greatest imponderable is the way in which the country and the world will cope as the planet gets hotter and extreme climate events like drought and floods keep coming. And what it will do to agriculture, from which many poor people eke out an existence.

The expectation is that the fiscal deficit in the coming financial year will be pitched lower at 4.5 per cent from the likely deficit in the current fiscal of 4.8 per cent. This will bring the number in line with the medium-term fiscal goal. From this, it is clear that we are looking at a small realignment and not a serious overhaul.

As against this, a sharper change will be sought and expected in capital expenditure, seeking to take it up by 12-13 per cent to Rs 11 lakh crore. This is because where the capital spending goes matters a lot to roads, highways and railways. Plus, there is an expectation that interest-free loans for capital expenditure will continue to be passed onto the states so as to raise regional infrastructure growth.

Capital expenditure will be delivered because the revenue part will be expected to coast along evenly. This will be enabled by indirect taxes growing at 8.8 per cent, with the GST (goods and services tax) expected to grow by 10.5 per cent, reflecting a resilient domestic consumption.

Direct tax revenue, in good part from taxes paid by companies out of their profits, will grow healthily at 11.8 per cent as the base of companies will grow, with the economy growing healthily and corporate profitability remaining stable.

With the economy expected to remain on an even keel, let us examine what individual industries have mentioned in their wish lists as they have met government representatives so as to build a castle firmly anchored in the ground and not in the air.

Technology moves forward with funding and incentives for research and development (R&D). The tech sector, which is rolling in money, still seeks government support as hugely important new sectors are emerging, like artificial intelligence, block chain and quantum computing. These can transform daily life as well as businesses and enable future growth.

Right behind is the healthcare sector, without whose robustness the people will not be healthy or be able to provide the skills that will be the sinews of technology. And the way to begin is at the bottom, with rural healthcare facilities. These will have to be revolutionised by telemedicine, which will deliver better care at controlled costs.

If we jump to the top of the sector, the aspects we see before us are pharmaceuticals and medical equipment. India is already the global leader in affordable medicines, which have to go up the ladder as new chemicals or molecules are invented all over the world. These must be made in India and these will have to be offered at the village level itself, through prescriptions generated by telemedicine. And there will have to be cameras and scanners to capture the images which will have to be generated. This will need the government to help out.

To transform countryside education, it must go hand in hand with healthcare. Students of high schools and colleges should be able to access the digital knowledge world and download e-books so that the age of the photocopier is left far behind. The government must to develop the IT backbone and take it to villages so that youngsters can use their smartphones, which will have to work as mini libraries. And, of course, the smartphones will perform with signals from towers or satellites.

The need for power and signals for smartphones brings us back to infrastructure. Along with power, the villages will need roads, which must lead to highways and railway lines so that youngsters can easily go to coaching schools to prepare for competitive examinations and those who do well can go and live in towns where better jobs are offered.

In sum, the government still has to keep financing capital investment and infrastructure. It should give up the thought that it can step back so that the private sector can take over. Here, the Budget will have a critical role to play.

In the old days, the Budget presentation, through which the country came to know about it, was overblown. The country stopped to pause to hear or see the Finance Minister through radio or TV and the media spent endless hours trying to highlight a few aspects of the Budget. This gave the minister a chance to do a good bit of grandstanding.

Today, the Budget papers are released online, allowing the media, analysts and corporates to pore over the numbers quickly to come to their conclusions.

But some of the mystique still remains, particularly for the layman, who wants to know whether he will have to pay more or fewer taxes and turns to the tax accountant to find out if his tax bill will go up or not. The layman forgets that since the time when Manmohan Singh, as Finance Minister, transformed the economy, incomes tax rates for individuals have gone down. But the layman does not notice it as he sees his tax bill going up and forgets that his income has gone up much more.

What he also does not notice is that the present dispensation has introduced the revolutionary GST regime, which has lowered taxes that consumers have to pay through sales tax and excise duty; he thinks he is paying a lot more as GST, when, in fact, he is consuming a lot more.