@the_news_21
Mumbai: Union Finance Minister Nirmala Sitharaman has done what most embattled Finance ministers tend to do, that is to resort to increasing taxes on liquor, tobacco, imported high end luxury goods, disinvestment of Central Public Sector Undertakings (PSUs) like Air India, opening up of the Insurance sector to Foreign Direct Investment (FDI) to mop up finances to fund investments in health, infrastructure projects, innovation and research and development (R&D) so that a booster dose could be administered to a economy that has been afflicted by the Covid-19 pandemic.
In what appears to be like “Rob Peter to Pay Paul” the Union Finance Minister has decided to increase taxes what is often referred to as “Sin Tax” on liquor and tobacco products and further raise taxes on high end luxury goods for the rich. Although the FM was quick to clarify that the Agri-cess to be charged on petrol and diesel to fund agricultural investment will be subsumed by the oil companies and not passed on to the consumer, it is unclear as to how the oil companies will bear the pinch to their pockets without passing it on to the consumer.
The strategy of FM Sitharaman appears to be go on a spending drive in terms of increasing Capital Expenditure while leaving the Fiscal Deficit at 9.5%. The FM intends to raise finances through strategic disinvestment of PSUs like Air India, BPCL, SCIL, CCI, IDBI Bank, Pawan Hans, Neelachal Ispat Nigam limited etc. to be completed in 2021-22.
It remains to be seen whether the government attracts any buyers, as it has been trying to disinvest its stake in Air India for quite some time. The Congress led opposition has been quick to slam the government for what it calls “selling off family silver”. It is a charge that has been heard ever since the winds of liberalisation began to blow in the country from 1991 onwards.
The move to raise FDI in the Insurance sector from 49% to 74%, bringing out IPO of LIC, offering 7 ports on PPP mode of operation is bound to raise the hackles of the opposition as well as the critics.
Another key area that the FM has turned the attention to is the Health care sector. The Corona pandemic has exposed the woefully inadequate, over-stretched public health care system in the country. Although, Sitharaman has increased the budgetary allocation on health care sector by a whopping 137%, compared to last five years the overall allocation of just 1.8% is still far too short. In Global terms India ranks below China when it comes to spending on health care.
Although the government claims to have ensured that the Minimum Support Price (MSP) for food grains and pulses 1.5 times the production cost. The budgetary figures of MSP for Wheat for 2019-20 of Rs 62,802 crore to Rs 75,060 crore in 2020-21 is just not enough to satisfy the agitating farmers on the borders of New Delhi. In the case of Rice it has been Rs. 1,41,930 crore in 2019-20 to Rs. 172,752 crore in 2020-21 and for Pulses it has been Rs. 8,285 crore in 2019-20 to Rs. 10,530 crore in 2020-21.
The government has increased the Agriculture credit to Rs 16.5 lakh crore for fiscal year 2022, but will be targeted for animal husbandry, fisheries and dairy development. The budget is not clear on what is in store for the already debt ridden farmer who yearns for a loan waiver. However, the government has announced the setting up of Agriculture Infrastructure Fund to augment rural agriculture infrastructure.
Even as the opposition and some farmer unions are alleging that the current Agriculture Produce Market Committees (APMCs) are being undermined by allowing farmers to sell directly to private players, the government has gone ahead with announcing integration of 1,000 more Mandi’s to its e-NAM (National Agriculture Market). Giving out clear signal that it is in no mood to withdraw the three farm laws it had passed in September 2020.
The budgetary allocations for infrastructure projects announced in poll bound states of Tamil Nadu, West Bengal and Kerala is not going to yield immediate results, but is aimed at wooing the electorate.
But the Center has very little in terms of infrastructure projects and investment when it comes of Maharashtra. All that Maharashtra has got in terms of budgetary allocations is for central counterpart funding for Nagpur Metro Rail Project Phase-II and Nashik Metro which is Rs. 5,976 crore and Rs. 2,092 crore respectively, and a future dedicated East-West freight Corridor from Bhusaval to Kharagpur to Dankuni. To rub salt into the wounds as it were the budget announces a plethora of sops for the IFSC in GIFT city in Gujarat.
Although the government is trying to reinvigorate human capital by investing in setting up of 100 new Sainik Schools, strengthening 15,000 schools and setting up a Higher Education Commission (HEC) just does not seem to be enough. The Covid-19 pandemic has forced students, especially in rural India to stay at home and exposed the huge gap in the last mile connectivity in digital India. The government it seems to have left out or ignored the poor state of affairs in Primary education in India.
In a bid to give a boost to the real estate sector, especially to the affordable housing sector, the government has extended the tax holiday scheme up to March 2022. But will the states and especially poll bound civic bodies like Brihanmumbai Municipal Corporation (BMC) already impacted by falling revenue from property tax, afford yet another tax holiday.
Most of the budgetary allocations, schemes, funding of infrastructure projects and social welfare schemes seem to be dependent on the governments ability to raise money through Sin tax and disinvestment. While the ordinary people will not mind paying more for the luxury items and liquor and tobacco, it all depends upon whether the government is able to raise the fiscal resources through disinvestment of CPSUs. Past experiences with Air India disinvestment raise a few frown lines on the forehead.
