Tough road ahead

BARELY 24 hours after the presentation of the Union Budget, North Block has already issued three clarifications — on the jumble that the personal income tax has become, to quell apprehensions among NRIs over their tax liability and on a new dividend distribution tax regime. That is not all. The government has no idea of the number of people who will migrate to the exemption-less income tax regime. Yet, it has calculated a revenue hit of Rs 40,000 crore. If the government wanted to spur consumption by putting more money in the hand of the consumer, it is a shot in the dark. The withdrawal of exemptions will endanger small savings worth Rs 2 lakh crore, an easy avenue for the government to finance its expenditure. The alternative then is that the government will have to resort to costlier borrowings at a time when its repayment of debt and interest has touched record levels.

This fiscal’s disinvestment target was also on a wing and a prayer. A shortfall in the next financial year’s more ambitious disinvestment target of Rs 2 lakh crore will put the government’s spending on social sector programmes in a pickle, as is the case in the ongoing fiscal. There has been under-spending of over Rs 75,532 crore on food subsidy. The domino effect is visible. Foodgrain stocks have piled up to record levels as the government did not have the funds to distribute it at reduced rates. And with godowns brimming with foodgrains, procurement is also likely to come under pressure.

The Budget has several notable intentions — doubling milk and fish production, solar pump sets, a global exam for admission to Indian universities, higher import duty on items that SMEs (small and medium enterprises) can make here and the government empowering itself to keep an eagle eye on unnecessary imports. But the broader point is that the failure to meet targets this fiscal — from fiscal deficit to disinvestment — has raised questions about the trustworthiness of the numbers announced for the next financial year. The burden of unmet receipts is certain to put pressure on government expenditure, and the ones to face the impact will be the poor and rural people.