Union Budget 2014-15 AN INCISIVE REVIEW
Common man, who was disgusted by the mismanagement under the ten-year-long UPA’s rule, was looking at the Budget 2014-15 with a great hope. Whereas, salaried class was hoping for raising of exemption limit to rupees 5 lakh and reprieve from inflation, SSI’s for raising exemption limit for excise duty, youth for employment, and industry at large for kick-start of manufacturing growth; almost all sections wanted something from the government for happy days.
Though health of the economy has been said to be not good; Finance Minister had aroused the hope for 5.4 percent to 5.9 percent growth in GDP. It is true that the rate of inflation has come down marginally, however, manufacturing sector has been passing through worst condition. Danger of monsoon failure is also, not a good sign for economy in general and agriculture in particular.
Different people evaluate the budget differently. If we ask salaried youth, budget has helped him to reduce his tax burden by raising exemption limit; and more deductions allowed in terms of savings, home loan interest repayment etc. Foreign investors may be happy due to raising of caps on FDI in defence and insurance; and some more facilities for FIIs. However, evaluation of the budget is never good, if it is done partially. It would be better to evaluate budget according to the aspiration of the people in general.
Employment and Employability
According to the census 2011, 4.7 crore youth between 25 and 34 years of age are unemployed. Situation is even worse in care of Adivasi and Dalit youths. They need employment. Budget does talk about apprenticeship scheme and skill development to improve employability; however for the creation of more employment opportunities we will have to change the production system and the overall development model. Everybody accepts (even the supporters of globalisation), that the model of development adopted under LPG, is a model of jobless growth. But it is ironical that the present budget is not in much variance with the budget/policies of the previous regime.
The experience in the last two decades has been that the share of agriculture in GDP has come down from 25 per cent to 13.5 per cent. The share of manufacturing which had started increasing marginally, has again come down to around 15 per cent of GDP. People in the government had been talking about raising the same to 25 per cent. In the last one year, the rate of growth of manufacturing has come down to 0.7 per cent—after remaining near zero percent in two years before that. It was obvious expectation from the budget that it would boost manufacturing. It is correct that steps have been initiated for National Investment and manufacturing zones, 4 industrial corridors, including Delhi-Mumbai industrial corridor, creation of additional capacity in main manufacturing industries etc. However budget has failed to identify and address major causes for manufacturing downfall namely high interest rates and huge imports especially capital goods from abroad. If we really want to boost manufacturing, we will have to reduce interest rates. High rate of inflation is the major cause of high interest rates. Therefore, combating inflation should be top on government’s agenda, apart from curbing imports, especially from China which include imports of electronics, electrical goods, power plants, capital goods, telecom equipments etc. Budget has failed to address this major irritant to the growth in manufacturing.
It is good that the FM has not increased taxes and has also tried to limit government expenditure and keep fiscal deficit within 4.1 per cent of GDP. In fact, the best way to combat inflation is to keep check on expenditure by rationalising subsidies. But at the same time supply side is also very important, especially supply of food products. To boost production of food products we need to encourage agriculture. But this budget despite talking high about agriculture and farmers (especially 7 lakh crore of farm loans), fails to give new lease of life to farmers. It is unfortunate that the budget provides less than one per cent of the budget for agriculture.
Social sectors like health, education, women and child development, SC/ST or even minorities, drinking water etc. all have continuously been neglected and this budget is also no exception with hardly 9.5 percent of budget being allocated for the same. In fact if we want to reap the demographic dividend, we need to increase expenditure on social sector.
For the last so many years, our external balance is badly disturbed. Due to high Current Account Deficit (CAD) in our balance of payment, our rupee is continuously stressed. Weak rupee increases industrial costs partly by way of costly imports and partly due to increase in interest cost of foreign loans raised, by our corporates. There was an urgent need to curb imports for strengthening rupee, in which this budget has failed miserably.
We do need smart cities, however, more important is to improve the education and health services in cities and rural areas alike. It is imperative to raise the level of living of 30 per cent of our population, living below poverty line by providing them the opportunity to earn more. Census data clearly reveals that in the era of globalisation, poor the deprived, Dalits, Adivasis all are losing their traditional land and becoming landless labourers. There is a need to reverse this trend. For the same we need to change the present day model of development, the model which is based on FDI and big corporates, as this is a model of jobless growth and encouraging the deprivation further. It is unfortunate that the present budget is no different from the budgets of the previous regime.
By Ashwani Mahajan
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