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The Union Budget 2015-2016 : Glaring Holes

For all the article my key resource is the complete text of the speech of the Finance Minister, available here : Full text of Budget 2015-16 speech, which I have perused in full before and during answering this question. 

Please click on the link and keep it open on another page, I have extensively referred to this document throughout the article

I am frankly surprised at the high-decibel coverage at this non-event, given that it does nothing that was not expected, as also it does nothing of import in most fields... I am more than a little disturbed to see a continuance of the status quo that we have been used to... and I am shocked that few commentators, a select few apart, have not noted the fine print of this budget. 

Before I rip into this budget {My focus is on the negatives} - let me place on record that the current Government is the best we have had in a long time... but democracy gives me the right to criticize what is wrong and disturbing. More than disturbing - it is stunning to say the least. And at no point do I deny the more than a few good points of the budget. Other people have covered them; the negative is however very disturbing. Let me also place on record that points nos 16{i-x111}, 18, 19, 20, 21 and 22 of the Budget document has done a great analysis of the problems being faced by the nation. 


DEFENCE
The defence budget is at 1.75%, continuing a steady decline. Furthermore, this now the lowest it has been since 1962, when it was around 1.5%. And this when we are surrounded by enemies and real threats on all sides.


The Indian Armed forces need major induction of Weapon Systems as well as ammunition on nearly all fronts. This has been a part of the public record for some time now. Further, the threat from Pakistan, China and the ISIS is growing every day. In this backdrop, this continuing reduction in percentage allocation to defence is deeply disturbing. Not only that, 10 months into this Government, there is again zero movement on procurement and allocation of weapon systems that are critically needed - like the MMRCA - beyond mere words that mean nothing. 

It is a given that compromises have to be made in a developing economy that is strapped for resources.  But the continuing bloated Government expenses, subsidy bills and lack of real action on Black Money places this in rather a different backdrop. How long can we put off the needed re-capitalisation of the Armed Forces? We ignore security needs at our own risk. It is sad to see few people pointing this out. Praise the good points - there are many - but dont overlook that massive errors!

This Government has passed over major decisions, while tom-tomming news like this : Narendra Modi govt clears defence projects worth Rs 80,000cr - The Times of India. The more vital projects are pending, and we can see no speed in implementing the re-arming of the nation's protectors. Rather than compromise defence, the focus should have been on reducing expenses on some other aspects less vital so as to fund the Defence needs. And there are many that can be identified. 

The clincher : "Among the three services, the air force has been allocated the lion's share of the capital Budget - Rs 31,481 crore, compared to the navy's Rs 23,910 crore and the army's Rs 21,574 crore. Even so, the air force allocation remains stagnant, indicating the government has not budgeted for buying the Rafale medium fighter, which would have required about Rs 15,000 crore as the signing amount.


What the hell is going on here????? This is deeply worrying! 


AGRICULTURE
Everything seems in place here, with one caveat : there is no plan to address the third critical problem : imbalanced fertilizer utilization, and the imbalance in the subsidy of the same. This is a much-needed and long-overdue reform that has been put off yet again. 

In another example, in point 33, the FM makes a clear reference to the prices commanded by the farmers, but neither in this document, or in any action of the Government, anyone has thought of the APMC Act, or scrapping it. The Base Panel had recommended scrapping or altering it way back in 2011 {Review APMC Act to check cartelisation: Basu panel}, and correctly identified it as a needed step to check cartelisation. Unless you free the farmer, how will he command prices? As on date, we are still discussing and passing the buck from State to Centre and back again, without doing anything practical. {CII panel to study impact of APMC Act in six states}


These are another big-bang change/s, that requires the Government to take on the vested interests and vote banks. Words are nice - how will you do it? It cant be done without taking apart your own vote-bank, and amending or scrapping APMC, Fertilizer Subsidies alteration, Re-visiting Urea Policy etc. Point 29, 30, 31, 32, 33 are only words, without a clear implementation roadmap. Perhaps, one may emerge : let us see. 


FUNDING THE UNFUNDED, JAN DHAN TO JAN SURAKSHA

The piece de resistance of the budget, respect sir - respect for the entire points nos 34, 35, 36, 37 and 38; as well as the next section - points 39, 40, 41, 42, 43, 44 and 45

Bankruptcy Laws, TReDS and MUDRA bank are much needed, given that the Indian Economy is driven largely by the Unorganised sector, contributing 57.3% of net domestic product, 34% in manufacturing NDP at factor cost, as well as nearly 40% of national savings . {Interested People can follow my blog, where I shall review India, Uninc by Prof Vaidyanathan on this sector of the economy}. 

Having said that, the statement in point 42 regarding unclaimed PPF deposits to be utilised will need clarity as well as a defined framework, let us see if this comes...


EDUCATION AND SKILL INDIA
This refers to point nos 75-89 of the budget document. 

"Jaitley proposed to set aside Rs.69,074.76 crore for education in 2015-16, as against Rs.70,505 crore in the revised estimate in 2014-15. The revised budget for 2014-15 has reduced the education allocation to Rs.70,505 crore from Rs.82,777 crore as was pegged in the budget estimate. Of the total outlay for 2015-16, Rs.42,219.5 crore was pegged for the schools sector and Rs.26,855.26 crore for higher education. Allocations to the school sector was cut by around 10% in its planned outlay from Rs.43,517.9 crore in the last budget to Rs.39,038.5 crore in the year that begins on 1 April. In comparison, higher education has been given a plan allocation of Rs.15,8555.26 crore in 2015-16, as against Rs.13,000 crore pegged in the revised budget for 2014-15. In other words, the higher education sector saw an increase of nearly 22%.





What the hell is going on? I quote from the Budget document : 16-iii mentions employment for every house, 16-iv reduction of poverty, and 16-vii specifically mentions a school ". To ensure that there is a senior secondary school within 5 km reach of each child, we need to upgrade over 80,000 secondary schools and add or upgrade 75,000 junior/middle, to the senior secondary level". And then, you CUT  the allocation to schools!!!!!!!

What the hell is going on????????


TAX PROPOSALS
Again, no mention of the best news to come to India for a long time in just about any Media : please refer to points I{1-8}, II{1-14}, III{1-4} in Customs section of the annexure; I{1,2,5,6 and 8} in Excise section of the annexure. 

This is a long standing demand for a correction that has now begun; the reversion of the inverted duty structure. The full import of this section will only be known after some time, as more analysis and experts go into the nitty gritty of the budget. But, as it seems now, a much-needed correction has begun. Respect, sir!

Point 109 : GAAR postponed, yet again. Recall Pranab Mukherjee? The General Anti-Avoidance Rules (GAAR), aimed at companies and investors routing money through tax havens such as Mauritius, had been scheduled to be implemented from April 2014. They will now come into effect from April 1, 2016. "The indication from the government seems to suggest attracting capital flows is imperative for the economy and to fund the current account deficit," . {Controversial GAAR norms deferred to April 2016}. It is being claimed that all recommendations are now being critically appraised. What was happening for the past months and years? Were the people sleeping? 

Wow. What can I say? Will these ever see the light of day? Your guess is as good as mine!





CONCLUSION

This budget has been justifiably praised on any number of points; sadly, it has got no praise for the two biggest points in its favour : The focus on the unincorporated sector, and the change in the duty structures. But most critically, there has been little critical appraisal of its faults, which are numerous. 

This is a budget for Corporate India, and the top 20% of society. As I noted in my previous article on this budget {Vishal Kale's answer to What are your expectations from the Union Budget of India (2015-16)?}, Defence, Education, Health and Rural India are the priority sectors for us.

If poverty is reduced, in addition to a growing economy, we also require an educated and healthy population, which means an effectively functioning primary and secondary school set up, increase in facilities and so on. We already have an excellent higher education set up. If on the one hand you are pitching yourself as pro-poor, and on the other, you are increasing focus on high education and cutting on schooling spends in terms of a percentage, this does beget the question : are the priorities correct? 

What we are in effect saying is, Corporate India, Middle Classes can reap immediate benefit, while making no efforts to tackle the real problems beings faced by Rural India, like reducing middlemen, education, etc. This is a majority government, they can easily take hard decisions. And yet they are not doing so - as I had foretold much earlier. And that is what makes this budget completely unimpressive, and very UPA 3-ish. 

My rating : 2 stars. As I expected....

Asia's third-largest economy spends about 1 percent of its gross domestic product (GDP) on public health, compared with 3 percent in China and 8.3 percent in the United States. Indian states manage their health budgets separately. From : India keeps tight rein on public health spending in 2015-16 budget


We still dont have our priorities in place... and that is the most disturbing!

Jaago, Sonewaalon!

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