Business Line hosted a Facebook live chat on the Budget proposals and its implications with Associate Editor Raghuvir Srinivasan. Edited excerpts from the chat.
Has the Budget increased subsidy (in real terms) for Food Security Act 2013? Does the Budget express any intention to reduce the number of beneficiaries as mentioned in the Act? 3. Has anything been said in the Budget about reduced role of FCI in garnering rice and wheat?
Yes, the Budget has increased the subsidy under the Food Security Act. Food subsidy will go up from Rs 1,15,000 crore budgeted last year to Rs 1,24,419 crore in the coming year. And, there is no mention about reducing the number of beneficiaries. There is no mention about the FCI in the Budget to my knowledge.
In terms of comparison to Budget estimate of last year, it is an increase of 8.19 per cent, higher than the inflation rate for sure. So it is an increase in real terms alright.
Does the Budget make a strong case for rate cut? Is it reformist or populist?
Rate cut, yes, I think it does. Though the fiscal deficit target has been pushed back by a year, it is still acceptable because inflation is under check and the extra money will be invested in infrastructure and not spent on consumption. The serious intent on fiscal consolidation is evident. Reformist or populist: I think it is certainly not populist. Mr. Jaitley has been careful to balance between the needs of industry and allocations for the social sector.
How does this Budget help micro / small enterprises and startups?
The Budget has a significant proposal for MSMEs who face a major problem in collecting their bills raised on customers. Due to the long credit period that they are forced to offer, MSMEs end up having cash flow problems. The Budget now proposes to set up an electronic platform for discounting bills which will help MSMEs to tide over cash flow problems.
Earlier, girl child used to get a concession on interest on education loans. Will it continue? Since the Government is promoting easy loans for education, is there any chance that it will include more courses and colleges under its ambit?
Yes, the earlier concession will continue. N o changes there. As for whether more colleges and courses would come under its ambit, well, its for the banks to decide on that I guess.
Deduction for pension is up from Rs 1 lakh to Rs 1.5 lakh. Will it be part of the overall deductions allowed under Section 80C?
Yes, it will be under the overall ceiling. B u t you will get an extra Rs 50,000 deduction under Section 80CCD, if I recall right, for contribution to the New Pension Scheme.
So many projects are on hold due to non-clearance from Environment and Forest Ministry. This has become a bottleneck in the real growth of the economy with employment generation, building better infrastructure etc also not moving. This delay is also leading to increase in the project cost. Has the Budget addressed these issues?
Well, the Government has already tried to address this issue in the last nine months that it has been in power. The Land Ordinance is part of that effort. The Budget cannot address this issue individually as the problem is a larger one. Efforts are needed across Ministries and government departments and my sense is that it is happening already.
I am a physically challenged person, what is in this Budget for me? So is the total is now Rs 1,00,000 under 80U and 80DD?
The Budget has increased the deduction under Section 80U and under Section 80DD for differently abled persons by Rs 25,000.
What goods are going to be costlier? Why is there a feeling that the middle class is impacted the most in this Budget?
Well, a lot of services are going to become costlier due to the increase in service tax from 12.36 to 14 per cent. Everything from eating out, to telephone bills to booking tickets on IRCTC etc will become costlier. Thanks to increase in Customs duty, petrol and diesel has already become expensive. So any wonder that the middle class feels impacted?!
With rural infrastructure a big concern and, in turn, affecting food availability, food inflation, agri produce wastage, UPA government had provided tax exemptions for cold storage, warehousing facilities etc. but it didn't take off. How do you see this Budget and this Government's plans scoring in these areas?
Well, I'm afraid not much in terms of Budget announcements on this front but I'm sure the Government is aware of the problem as cold storages and warehousing are critical to tackling food price inflation.
Could you explain how the increased education cess will be utilised? Also, shouldn't the mid-day meal scheme get higher allocation as a result of this spike?
Education cess has not been increased, it has been subsumed in excise duty and service tax ahead of the implementation of GST next year. Service tax has gone up though. Mid-day meal scheme allocation has increased, I think, though I don't have the numbers offhand. But I don't think you should link particular sources of revenues to particular items of expenditure.
In most taxes, education cess has been merged, resulting in a flat rate. How will it impact the common man's wallet?
Well, the merger of education cess is not the problem. The fact is that the FM has increased service tax under the pretext of merging education cess. The impact, obviously, is that your outgo will increase when you eat out or when you speak on the phone or when you buy a railway ticket on line or when you pay your credit card interest and so on.
Has the Modi govt brought Swachch Bharat cess as a replacement for the Education Cess? If not, on what services will this levy be applicable?
No, the Swachh Bharat Cess is not a replacement for education cess. It will be in addition to it.
It is great to see so much spending allocated towards higher education. Setting up of IITS, IIMs and AIIMS across the country will definitely increase opportunities for students. But this rapid expansion without sufficient well-qualified faculty to teach in such institutes will definitely result in poorer quality of education. How do we meet this challenge?
You have hit the nail bang on the head! We don't even know what has happened to the IITs/IIMs announced in last year's Budget and here we are listening to more such announcements. Getting trained faculty is indeed an issue in higher education especially when these institutes are set up in so-called remote centres away from metro cities. If an IIT or IIM is just a block of room in cement and concrete, well, the FM can have as many as he wants! Sadly, it is not so. I think that the focus should be to attract teaching talent with generous compensation terms apart from visiting faculty rather than just announcing more and more institutes.
Very senior citizens (80 years and above) are not covered under medical insurance" The Budget 2015-16 says: "For very senior citizens of the age of 80 years or more, who are not covered by health insurance, deduction of Rs 30,000 towards expenditure incurred on their treatment will be allowed. These should result in some tax saving for the senior citizens." Can you please elaborate on this?
I think the FM is referring to those who don't have medical insurance cover. They will now get the benefit of a deduction for expenses incurred for treatment. Of course, if you ask me how many citizens will benefit from this now, the answer will be: not too many. But as our society ages and life expectancy increases, more people might enjoy this benefit.
Can you explain how buying sovereign gold bonds would be different from buying gold jewellery or coins?
Simple, you don't have to find means to store the gold safely. You will enjoy the same benefits in terms of appreciation in value without having to worry about storage and safety. Of course, this is assuming that you are not talking about gold jewellery, which is functional and sovereign bonds cannot replace them. This is only for those who buy gold coins, or biscuits merely as an investment.
Has the middle-class salaried person gained at all? Any income benefit except medical-wise?
The middle-class salaried person has not gained in terms of lower tax percentage or higher income slabs. But the Finance Minister has tried to push the middle-class towards retirement and pension security by proposing a higher deduction for contributions to pension schemes.
The Karnakata CM has said that the Budget is 'anti-poor, anti-farmer and anti-growth'. Your views on that? Considering he is from the Congress party, for him to hold such an opinion is obvious! But a lot of other people too have the same view. Is it just an anti-Modi Government comment or does it hold weight?
Well, it is anti-poor to the extent that the Finance Minister is raising more money through indirect taxes which are known to be regressive as they affect everyone-- rich and poor-- the same way. But anti-farmer and anti-growth? I don't see how the Budget is any of those.
There is no policy to provide 'treatment financing' for those suffering from a disease (where mediclaim cover is not available). Why aren't the governments not addressing this issue. This facility is readily available abroad. Shouldn't the government focus on such initiatives?
I think this is something for the IRDA and insurance companies to address. Not the government and certainly not in the Budget I think!
There is a proposal to set up a public debt management agency. Does it mean that this function will be taken out from RBI?
What it means is that the RBI will have to share its powers with the government in managing public debt. This is not a new proposal and the idea has been around for a while.
On Budget day, after swinging over 700 points intra-day, the BSE Sensex finished up. Do you feel the stock markets have given a verdict against Modi's big budget?
I don't think so. The way to describe it is that the stock market has not found anything either extremely positive or extremely negative in the Budget!
Your views on TDS proposed on recurring deposit?
TDS on RD is a regressive move that could have been avoided. When the stress is on increasing savings, the FM has disincentivised RD as a savings option.
What will be the interest rate an individual can earn while monetising gold? Will the earned interest be taxed?
The details are awaited on the gold bonds.
How do you rate the pension related initiatives proposed in the Budget?
The pension proposals are all excellent. I think they are one of the main positive features of the Budget. Of course, as always, how well they are implemented will be the key!
Given the Indians penchant for physical gold, do you think the attempt to monetise gold will be successful? Will it have an impact on either the demand or supply of gold?
Good question! So far as the gold is held for investment in the form of bars or coins, the deposit scheme and sovereign bonds will help. The section of citizens who buy gold jewellery will obviously not be enthused by the attempts to monetise gold. But even if just a tenth of the gold held now is converted to paper then I would consider the idea as successful.
How would you rate this year's Budget?
On scale of 1 to 10, I would rate it at 7.5.