BUDGET LECTURE
By Sarath Ramesh Kuniyl
Story Dated: Wednesday, March 4, 2015 0:34 hrs IST
Shankar Acharya at the 16th Malayala Manorama Budget Lecture at the Le Meridien, Kochi. Photo: E.V. Sreekumar
Lauding the Narendra Modi-led NDA government for presenting a “better than average” budget, the honorary professor at the Indian Council for Research on International Economic Relations, however, stopped short of terming it “excellent or historical”.
Kochi: Two cheers for the Union Budget 2015-16, said noted economist Shankar Acharya. “Not three cheers, mind you,” emphasised the former chief economic adviser, at the 16th Malayala Manorama Budget Lecture here.
“The reasons are many [for the rating]. India needs a sharper fiscal deficit reduction in 2015,” Acharya pointed out, referring to the relaxation in the deficit to 3.9 per cent, which was initially pegged at 3.6 per cent for 2015-16 and 3 per cent for 2016-17. With the burden of the implementation of the 7th Pay Commission report next year and the recovery of crude oil prices looming large, Acharya said Finance Minister Arun Jaitley will find it difficult to stick even to his renewed promise of attaining the 3 per cent target by 2017-18.
The other grey areas, Acharya said, were JAM—Jan Dhan Yojna, Aadhaar and Mobile—and Goods & Service Tax (GST). He welcomed the government's efforts to provide subsidies directly to the accounts of the targeted beneficiaries to be identified on the basis of Aadhaar information. “But,” he said, “JAM makes sense only if the existing benefits are transferred to the account holders.” He said Jaitley could have elaborated more on how he planned to plug the leakages in the existing direct benefit transfer scheme.
The GST, too, was a step in the right direction to replace levies and multiple taxes and “unify India as a single market”, Acharya said. An increase in services tax from 12.36 per cent to 14 per cent was a positive move. “But it will be a tough ask for the government to get it passed in Parliament.”
The reduction in corporate tax from 30 to 25 per cent over four years was another step that lacked transparency, Acharya said. “It is a laudable objective to attract investment, but that it will be done in next four years is disappointing,” he said. “I ask, why nothing this year?”
Acharya gave thumbs-up to the increase in the states' share of Central taxes from 32 per cent to 42 per cent, welfare schemes such as Senior Citizens Fund and Atal Pension Yojana, revitalising Public-Private-Partnership by introducing National Infrastructure Fund and more tax-free bonds, efforts to make it easier to do business in India by bring in a new bankruptcy law, and the amendment of the RBI Act.
Acharya, however, criticised certain measures like an aggressive approach towards the black money issue which might encourage “exhortative behaviour” from taxmen and investigating bodies, and the absence of credible efforts to save public sector banks which are reeling from lack of capital. Lack of labour reforms, too, came under fire from Acharya.