The Interim Budget presented on 1st February by the finance minister appears to be full and not interim with several income tax law changes proposed. It is a mixed bag and must sail through the parliament, for no party will dare oppose, for each is, to its own arithmetic.
Any provision that helps farmers must be welcome. The budget under the Pradhan Mantri Kisan Samman Nidhi has made a provision of Rs 6,000 per annum to be transferred by DBT to the farmer’s accounts, with less than 5 acres land holding. While this translates to Rs. 500 per month, how a family with at least three to four other members to support, will cope is difficult to comprehend. This is expected to buy him seeds and fertilisers, but then farming is not just seeds and fertilisers. Farmers already driven to the wall with loans, barely eke out an existence. If an urban citizen is given a tax exemption on an earning of Rs. 5 lakhs, in some way it is a recognition of the minimum required. Does the farmer not need the same? Admittedly, Rs 20,000 crore is also provided for the direct income support scheme in the current fiscal. This translates to another paltry Rs. 135 per farmer per month. There are 12.56 crore marginal and small farmers with less than 5 acre holdings and they must be treated with more respect. Will this pay out, see a reduction in other welfare schemes? If not, it could dent the fiscal deficits.
The middle class finally has something to cheer for in the budget. Those with an income of up to Rs 5 lakhs annually, will have to file tax returns to get a full rebate. One could save up to Rs 12,500. If benefits under 80c are included, income of up to Rs 6.5 lakh will have no tax. An interest on income of up to Rs 40,000 will also attract no tax. However, an individual earning even a rupee more than the cut off and with no other means of income to save, will be left to the vagaries of taxes.
A Pension for informal sector workers is a great idea. Covering workers earning up to Rs 15,000/month it assures a monthly 3,000 rupees, available at the age of 60. However, 500 Cr provided in the budget can cover only 1.38 lac beneficiaries. If all 10 crores workers join, an outlay of 12000 Cr will be needed. Further, for a matching grant of the government, a worker too has to contribute 100 rupees a month if he is 29 years and 55 rupees if he is 18. With a lock in period of 31 years rising to 42 years, the first set of workers eligible for pension will be year 2050. 200 rupees invested per month for 42 years, yields 15,71,766 rupees at 10% CAGR returning 10,335 rupees a /month at 8% simple interest. Who gets the corpus when the pension stops?
The real estate sector in a slump has an unsold inventory that aggravates the problem. According to National Housing Bank data, property prices in Mumbai and Bengaluru increased annually by just about 7.50% and 5.75% respectively between June 2013 and September 2017. In Delhi, prices actually fell by 0.70% annually during the same period. Investors are in distress due to delayed projects. Rising interest rates and high maintenance cost and tax on rentals and capital gains has rendered investments unviable. Will then, an announcement of no tax on rental income of up to Rs 2.4 lakh on second house, which is notional for many and some relief in capital gains boost the real estate sector? More importantly, can the middle class struggling to pay interest on one house, even think of owning a second house?
Pradhan Mantri Kaushal Vikas Yojana claims more than a crore trained in employable skills. Mudra Yojana was expected to open up new avenues of entrepreneurship and self-employment for such trained youth, women and others starting or expanding their businesses. Start-ups world over, have never been successful except for a small 8% to 10% of all those started with most success stories being in the retail and marketing space. Successful start-ups like Pulse Advertising, Kiwi.com, Zapier, Amazon, Uber or Ola who created new markets and employment, challenging the existing businesses are hard to come by. Claims that Mudra scheme generated massive employment without supporting data could be odious.
Skill training limited to being modular, and confined to a few sectors at basic levels do not necessarily support employment. Data available on Mudra Yojana’s official website, points to about 13 Cr given loans till May 25, 2018. Average sanctioned loans is about Rs 46,530 and the disbursed amount is Rs 45,034 which is insufficient to launch a start-up that provides self-employment let alone employment to others. In fact RTI reveals large-sized loans from the banks exceeding 5 lakhs that can generate employment, are a mere 1.3 per cent. Can these loans also become a liability for the banks in near future?
A National Program on Artificial Intelligence has been envisaged in the Budget. Certainly a welcome move when we consider the giant strides made by neighbouring China and the Technology warhorse the US. AI is high end technology that helps in culling out intelligent patterns derived out of data mining. The data itself is sourced from a variety of sources and devices most important being sensors in various applications. At one end, it can help improve methods and processes and on the other it can allow governments to take on the role of a big brother, a le Animal Farm.
A move to create one lakh digital villages in five years through the CSS and create digital infrastructure to support it is ambitious considering the state of common facilities in our villages. Most of the applications developed today are image based and are bandwidth guzzlers. IOT, a massive data generating application connecting more than 28 billion devices worldwide today, also needs precious bandwidth. Unless the last mile and reliability of services is improved, Digital villages notwithstanding, truly digital cities will also be a distant dream. The Budget’s total relegation of Education to a non-entity and the complete go by to institutionalisation of Skills is worrisome and questions the intent. If this is all the voters wanted, why the brouhaha?