Click to play videoThe Union Budget is around the corner and the anticipation is reaching a fever pitch. Will the Finance Minister roll out a dream, never-heard-of Budget or will he play it safe and populist in an election year?
CNN-IBN debated and discussed the various aspects of Indian economy and the expectations from the Budget on a special show Budget and Gen Next, conducted by Business Editor Paromita Chatterjee.
The focus of the show was to address important questions and problems with a ‘Young India’ perspective. To discuss the issue was an eminent panel comprising, Prasanjit Bose of CPM, Sandeep Dikshit of Congress, economist Ila Pattaniak, National Tax Director for Ernst and Young, Gaurav Tanjea and Sanjeev Bhikchandani of naukri.com.
The audience comprised of young: management students drawn from institutes across the country and chartered accountants..
Has UPA dream team lived up to expectations?
That was the first among the questions raised on the show. A snap poll among the audience showed that nearly 70 per cent of them felt the UPA govt hadn not lived up to its expectations.
When they took over, the economy was really taking off. So has UPA been able to exploit that potential? Bhikchandani agreed they had been able to do it consistently. "I think it's a good situation that we've got such a good growth rate. Bit it's also important to ensure that inflation is kept low while the growth is maintained. The one important thing is to include all sectors of economy in that growth."
But he also agreed it was a tough ask. Gaurav Taneja too agreed that the economic situation was pretty good when UPA came to power so it would be only fair to give it to them. "But having said that it's easy to screw up the situation. So it's important to build up on that." He also said while the first generation reforms were low hanging fruits and came easy, it's the second stage which was more challenging.
Has govt followed safe politics over good economics?
Ila Patnaik said the time to fix the roof is when the sun is shining and she wasn’t too happy with the government’s way of functioning. “You could have done a lot more like financial sector reforms. This team -- given that the skills it has -- could have done a lot more,” she said.
Sandeep Dikshit however did not agree with Patnaik’s observations and said he wanted to know what refors were they all talking about. “For me the most spectacular thing has been the amounts of money the government has sent to rural areas both through NREGS and Sarva Shiksha Abhiyaan,” Dikshit said, adding that irrigation programmes have also been successful.
The biggest disappointments
Prasenjit Bose said that as an ally, he felt the measures taken by government for rural areas – and the ones cited by Dikshit – were half- hearted. “I wont say nothing has been done, they are many areas that are left. But someone’s dreams can become others’ nightmare.”
Patnaik said the “PM said we will improve delivery of services and governance. Till today, they are talking about expenditure.”
Many students in the audience said they were willing to pay taxes – the cess on education for example – provided there was accountability at the government’s level.
Bose said pitting one problem against the other won’t work and the solution was to hit at the root of the problem and figure out a solution. “ You don’t chop off your head when you have a headache,” he cited as example.
Patnaik said it was important to improve upon the existing resources before thinking of increasing the expenditure on other things. “I am not saying cut off anyone’s share, but also look at how things can be done and then go ahead. After all, they are spending the tax payer’s money,” she said.
Dikshit defended the government yet again and said the accountability question should be seen in the list of Bose’s statement. “As far as implementation mechanism is concerned, the PM started with it four to five years ago. None of us has been able to find a via media between bureaucracy and its self-interest and trying to do the thing that will make bureaucrats do things the way they are supposed to do,” he said, admitting it was serious failure on the “everybody’s” part.
However, he insisted clear that the system was transparent enough and a lot of work had been done in past years. Transparency and accountability levels have gone up.
But a snap poll done among the audience still showed that was not the popular perception. A majority felt the two issues were the government’s biggest problems.
Great Expectations: Are we being taxed to death?
A snap poll among audience indicated the obvious. Most of them felt both income tax and corporate tax rates were too high for comfort.
The question that was raised in this segment was whether doing business in India – given the tax structure – conducive? The kind of tax collections this year have been stupendous and many feel the Finance Minister has the scope of cutting tax rates.
But Bhikchandani said that while 34 per cent tax was within the “bounds of reasonableness”, surcharge could be marginally reduced looking at nine per cent growth rate. “But I think the tax is within limits,” he said.
However, Taneja disagreed and said that all taxes put together made for a huge sum. “Income taxes have grown considerably and constitute for 50 per cent of the total taxes. So there’s scope for a cut,” he said.
But given the fiscal deficit situation, isn’t it easier said than done? Patnaik said the most important thing the government needed to do at this stage was to remove exemptions. “While the tax rate is 33 per cent for somebody, it’s much less for someone else. It works out to be 20 per cent for corporates,” she said, adding India had to look forward and couldn’t rely on “patchwork” all the time.
Dikshit said the problem with exemptions was the interest groups that matter in the polity. He said if corporates raised their effective rate of tax to 24-26 per cent, the government will bring down I-T rates. Dikshit also replied to Patnaik’s point about doing away with exemptions. “If I do away with exemption, the critical mass that requires that to happen becomes too huge,” he said.
Bose, however, said it was okay to give exemptions but at the same time ensure equitability.
BJP convenor Nalin Kohli joined the debate at this juncture. He said taxes were complicated issues but there was little denying that a tax cut across the line was needed. “When you look at the larger picture of budget, it’s a financial document that plans out government’s vision for one whole year. We have seen a price rise here, burdening the common man. At the same time, you have a slowdown and a hardening rupee in the international market. So at this stage a tax cut has to be done,” he insisted.
Surprisingly, Congress’s Dikshit agreed with it.
Creating enough jobs: Has govt done enough?
Most audience members said government had not done enough in this sector as well. But Bhikchandani said this audience wouldn’t really have problems finding a job. “They are privileged, well off and speak English. The nine per cent growth rate has been a bonanza for urban middle class India. So while you have a lot of people, there’s shortage of people with the right skills.” He emphasised on the need of inclusive growth
Dikshit had a ready answer for this as well. He said the amount of investment in rural infrastructure will pay off in five to seven years’ time.
But why should it take so long? Patnaik made an interesting point. “It’s not the job of the government to create jobs. It’s their job to create an environment of growth that reaches out to people,” she said, pointing out it was important for people to have actual, physical access to resources and facilities. Taneja agreed too and said it was important to generate conducive environment in rural sector as well.
While Bose too agreed there was skill shortage, he also said it was important to invest in education. “We should not forget that 70 per cent of workforce is employed in agriculture. So if you are talking about employment, you have to talk about it,” he said, adding inclusive growth was possible only by government intervention.
So where is the money going? While Dikshit said it was going into the Sarva Shiksha Abhiyaan, Patnaik was quick to point out the loopholes there. “Teachers are absent, teachers who do not know how to teach are employed and appointing teachers can’t make them go to work,” she said.
An audience member also suggested bringing in private players in Sarva Shiksha Abhiyaan to ensure accountability. Taneja said it was a great suggestion. “Employing private-public partnership at the basic level will enhance the base,” he said.
Bhikchandani suggested working at an economic model to ensure scholarships and grants went to the right people because a private player will invest only where he/she sees profit.
Price rise and inflation: Has govt controlled it?
That was the biggest problem facing the government last year. This year while the situation has been relatively better, public opinion – or at least the audience opinion – was divided. The audience gave a 50-50 to the government.
Patnaik said government was only saying it had curbed inflation but had in a way prevented prices from falling. “For the last four years – other than April and May this year – they have been consistently keeping price high for us by preventing rupee appreciation.”
Along with inflation, interest rates have also risen, making this a paramount concern for the government in an election year. Dikshit agreed. “Certainly, till last year it was cause for worry. Thankfully it has plateaued this year and keeping prices under check will the biggest issue for government this year,” he said.
Bose disagreed with Patnaik. “One important step that Finance Minister can take is to restructure duty and customs structure. So when prices rise, govt also gets a bonanza in terms of revenue. So say to give it back to oil companies, don’t burden the common man,” he said.
He also agreed with a student that the Government has to step up public expenditure and investment in agriculture and streamline the public distribution system.
Bijli, sadak, paani: Has it grown sufficiently?
Despite the public-private model, 90 per cent audience did not think infrastructure had grown considerably.
Dikshit admitted that Government had failed to provide adequate infrastructure growth. BJP’s Nalin Kohli jumped at the opportunity and said while the focus was on infrastructure during the NDA regime, it had gone down now.
Bhikchandani noted the sectors that had moved from a government monopoly structure to competitive marketplace structure – such as airline and telecom – had seen tremendous growth. “It’s important to move infrastructure to competitive marketplace,” he said.
He also said distribution should be privatised and customers should also be made to pay for electricity if they use it. Taneja, however, said privatisation was not a solution to everything. “It requires stable and good policy which sustains over time,” he said.
Dikshit agreed – even as audience booed – that there is a sense of urgency in the Government circles to do something about the flailing infrastructure.
So where will the money come from? Patnaik said FDI was an answer but that was not being done. “We are stopping money from coming in,” she said. A student pointed out it was important to have a good policy in place, to which most panellists agreed.
Patnaik, however, also gave the benefit of doubt to the government and said it was learning and doing things despite there being no consensus on what model to adopt.
The wishlist: What we want the Budget
Nalin Kohli, BJP: Rationalise taxes, provide relief to middle class and lower interest rates.
Prasenjit Bose: Spend more on agriculture, health and education. Do away with corporate tax exemptions, spend for poor people.
Ila Patnaik: Think long term. Don’t use tax payers’ money to buy votes.
Gaurav Taneja, Ernst and Young: Certainty is taxes, lower compliance costs and faster settlement of tax disputes.
Sanjeev Bhikchandani, naukri.com: Ensure nine percent growth, do away with surcharge, reduce interest rates.
Sandeep Dikshit, Congress: It will be a good budget.
Audience opinion: Tax agricultural income, better implementation, tax FIIs, remove cess, surcharges.
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