Taxes: To start with taxes, the small change in the new tax regime (NTR) is unlikely to spur any significant consumption or savings. On the other hand, the tax on investors will hurt and hence the Sensex is staying flat today. The disappearance of the angel tax is a good thing. The drop in duties on mobile phones, the attempt to rationalise GST rates, and the tariff reduction on medical equipment are all welcome moves. We need to see a lot more work on the reduction of tariffs if we want to make India competitive globally for finished products. No one initiative will make us globally competitive, but the right steps are important.
I for Incentives, Infrastructure and Inflation. Good things first, the continued spend on infrastructure at 3.4 per cent of GDP is commendable as we need more than $200 billion of investment in infrastructure, yesterday! The current allocation is about $125 billion, and the new proposal is a move in the right direction. An inflation target of 4 per cent is a meaningful goal to work towards though achieving this will be challenging on account of food prices - something the government does not have total control over. FDI simplification is a good initiative. We now see employment-linked incentives. The challenge is that the private sector in India needs to invest a lot more to create jobs. Till they do that incentivising employment is at the last mile. The first-mile incentive needs to be the focus.
Programmes: The fiscal deficit at 4.9 per cent is excellent news as also the intent to bring it to 4.5 per cent. We have discussed for long the need to be at 4 per cent. The programme expenditure is along expected lines – more to MNREGA, less to Defence, ₹1.26 lakh crore on education which is still low, and a chunk for rural and agri-based work and a bit for pulses and seeds. Will this allocation change education, agriculture, defense or pulses in a significant way? Unlikely.
Subsidies, Skills and Sustainability: The Economic Survey states that half the graduates do not have the skills to land decent jobs. This is a concern as we have quantity but lack quality. Artificial Intelligence (AI) gives India the chance to change this and push for skills against degrees. Growth in GDP has come more through productivity globally for the last 30 years than an increase in employment and hence pushing for skill-based jobs in AI can help India. We have too many employment-linked schemes but very few real jobs appearing on the horizon. Internships in the top 500 companies are a good initiative but address a minuscule percentage of the job aspiration challenges that the youth face. Social welfare in the spend on MNREGA and the package for Andhra Pradesh and Bihar is understandable. Credit extension to MSMEs is one form of subsidy. About 64 million MSMEs account for 128 million jobs in the country, almost a fourth of all jobs. Providing better access to capital is good. What will help MSMEs more are fundamental things like getting paid within 45 days! Adherence to some basic policies enunciated in the past will change the financial health of many MSMEs.
A budget can be risky and bold, a budget can be prudent, safe and spread out. The FM has chosen the latter in her seventh attempt at it.