By Vivek Pattanayak in Bhubaneswar, February 14, 2018: The Union Budget for the year 2018-19 presented by finance minister, Arun Jaitley just two weeks back, has sparked off a fierce debate, sharp views and comments in the print media, and panel discussions on TV channels, Radio talks and seminars and round tables in the educational institutions and professional organizations.

Although there are other budgets of equal constitutional importance like budgets of the State Governments, budgets of Zilla Parishads, Municipalities etc. the Union Budget traditionally draws most attention of the people of all classes, business communities, traders’ and farmers’ lobbies, corporate houses and also the state governments and other constitutional bodies as it is expected to guide the economy affecting widest segment in the population.

Corporate houses, business community and middle class people wait to know what tax reliefs is given. The State governments wait to see whether special packages have been given to them individually or generally. Their budgets follow the Union budget. Agriculturists like to know whether there are budgetary provisions with regard to agricultural inputs, creation of rural market etc. Industrialists like to know about excise duties, import duties, export subsidies etc.

The budget is the occasion in which the Union Government makes announcements regarding important policies on financial and economic issues, new fiscal incentives, tax cuts, new taxes, levies, duties and other impositions. No wonder there is excitement in the country at the time of its presentation.

Secrecy associated with preparation of budget originates from the British tradition. It is worth mentioning that once upon a time a Chancellor of Exchequer had to resign as there was a leak in the budget before it was placed on the floor of the Parliament.

In recent times although attempt is being made to demystify the budget with pre-budget consultations with wide sections of interest groups, the budget still remains a secret till the budget speech is made.

However it is preceded by many speculations, anticipations and anxious moments. Democratic India with periodic elections having a population of 1.3 billion consisting of diverse interest groups, different religious compositions, multiple castes and tribes, and uneven economic classes presents a fabulous challenge to a Finance Minister to prepare a budget especially in a year before the election.

Can a government drawing support from other political parties, whether regional or religious and expecting assistance in future ignore their interest on the eve of election? Can the ruling party hoping to have another mandate overlook interests of a large segment of population? The group may be based on age, gender, religion, caste and tribe?

In this context it is worth mentioning that the country has more than sixty percent of population in the age group of below thirty out of which huge number are above eighteen who will cast vote in the next election. There are people belonging to Scheduled Castes and Scheduled Tribes politically united and vibrant. Then there are farmers, whether medium or small, or marginal including agricultural labourers and industrial workers. The country has a large size of indigent people considered poor or very poor.

Budget, as earlier stated is an estimate of income and expenditure. Estimate has to be realistic. That is why one should look into what has been the actual receipts and expenditure in the past years and trends of the current year. Usually budget reflects the figures of last year but prudent person should go beyond that year.

While estimating expenditure first the government should look to charged expenditure which according to the constitution is not voted. Salaries of the constitutional functionaries, discharge of debt burden etc. constitute this. Then come the salaries of the government employees and if there are recommendations of Pay Commission extra-burden becomes an integral part of the budget.

The government keen to have higher growth rate considers this extra-expenditure as God sent advantage. People receiving extra money would either spend thus creating manufacturing or service activities or save in banks in fixed deposits, or buy stocks. Unless there is financial literacy additional money may not be in the right place.

Estimates of capital expenditure like road construction, railway lines will naturally include ongoing projects. Any omission would invite attention of CAG and invite criticism of public. Absence of new projects will also come under scanner of the States and other lobbies. There can be gap between what is estimated and what is realized. Income may fall short to due to poor collection of taxes. Litigations may block collections of dues. If manufacturing reduces receipts from excise duty will fall. Reduction of income will require closer supervision of expenditure as fiscal deficit is subject to legislative limit.

Any imbalance in fiscal situation would also draw adverse view of rating agencies. Fall in grade of rating agencies will dissuade foreign direct investments. Delay in land acquisition can affect construction of roads. Environmental clearance can be a hurdle to completion of projects. Expenditure is subject to effectiveness in implementation. It may depend upon the cooperation of the States. History has shown no budget has escaped criticism and no budget has been bereft of supporters. There can be wide gap between what is provided in the budget and what is realized.

In the light of these observations one should review the present budget. On the side of receipts, tax benefits have been given to corporates. The companies with sales upto Rs 250 crore have received reduction of tax to 25%. Such incentives have been given in the past. The main objective is to make corporations more profitable so that get surplus to expand their activities or invest in new projects thus creating jobs.

The government has been criticized for jobless growth and failing to create jobs either in public or private sector. Media is awash with news and views about loss of jobs. It is not certain whether corporates would actually expand activities and set up new projects. Doing business is an issue for long.

Last year World Bank index of Ease of Doing Business was not very encouraging. This year much publicity has been given to sudden spurt in number mostly on figures relating to metros, Delhi and Mumbai. The country is much wider than that.

Last year fiscal deficit was projected as 3.2% and 3% for fiscal years 2018 and 2019 respectively. Now it has been revised 3.5% and 3.3%.Revision of fiscal targets frequently in few years has obviously dented credibility. Although one of the rating agencies was optimistic in grading few months ago others were generally quiet. What will be the impact of this fiscal situation can be anybody’s guess.

Emphasis has been given on agriculture and rural sector quite naturally with widespread farmers’ agitation due to distress. Infrastructure on rural sector is right approach for access to market and storage. Much would depend on implementation. Increase in import duties on certain items to support new MSME sector projects has been criticized as protectionism. Whether this would really help indigenous industry to become viable the future will only say as new projects term loans and working capital assistance. Non-performing assets of Banks have virtually created stagnation in lending.

MUDRA introduced few years ago will assist this sector only through refinancing. SIDBI has to be more active. SFCs and SIDCs need to be revived to perform as NBFCs. Agriculture diversification can create jobs provided rural credit cooperatives are activated.

Since large sized irrigation projects will face enormous problems like land acquisition, environmental clearances and finally resettlement and rehabilitation, this has nearly become dream, dry land farming, sprinkler irrigation, rain -water harvesting and water conservation should be the emphasis for future and hence skilling and technology needed for this must be given priority.

Budget is one of the instruments of guiding economy. RBI will play its role through monetary policy. It has opposed any rate reduction which would cause inflation, financial profligacies like farm loan waivers. There is rising oil price. India heavily dependent upon on oil imports is vulnerable.

Capital market has experienced trauma partly because of global economic situation and also by possibly long term capital gain tax. Bond market shows increased yield sending message of lack of confidence.

Many decisions have nothing to do with budget. GST a reform of great significance after years of dilly-dallying and political maneuvering finally came outside budget. Many reforms like liberalization of FDI have come outside budget although their impacts are yet to show results. Even demonetization came not with budget and its effect on economy was striking.

What surprises are in store in the country or outside would be difficult to predict. Brexit created initial storm although it has been weathered. North Korea is still a flash point. South China Sea has not stabilized. Middle East with ISIS is down but not yet out. Taliban continues to raise its ugly head. India Pakistan uneasy and volatile border is cause of worry. Dokhlam crisis seems to have not fully subsided. All these factors may affect the future, notwithstanding a balanced budget.