Venue: Bangalore International Center
Each year, Bangalore International Center hosts discussion on budget and this year was no difference. This budget discussion was very special for me. First, with lot of study of international economics in past 2 years, I was able to understand many things said in the budget and what there long term impact could be. Second, it was interesting to know how external factors played role in shaping countries finances, micro-economic policies. Saying this, I am not an expert economist or budget planner, so it is always good to hear viewpoint from other eminent people to know depth of Union Budget of India 2015-16 budget proposals. Here is a summarized version from the event.
Prof. S.L. Rao moderated the discussion and raised different set of questions to each of the speaker to enlighten things in context of the budget.
Dr. M. Govinda Rao, Member of the 14th Finance Commission
Prof. S.L. Rao asked some important questions like managing fiscal deficit, over reliance on low crude prices in making budget, how to build capacity at local level especially when central government has increased state share in taxes to 42% and how to prevent black money. He also raised question of subsidies and what are the plans of the government.
Dr. M. Govinda Rao started his speech by asking a simple question, why we discussed too much about Union Budget but not much about the state/cities and municipalities? when majority of expenditure is done by them. Coming back to the budget, he emphasized that Finance minister has to make a balance between reform and growth. He elaborated reasons for Union government to cut back on schemes and giving more autonomy to the state in planning their schemes and implementation. That means, state government has been given more flexibility in providing basic public services. From the finance commission, he told the conditions to get grants have been made more flexible towards making local level governance more autonomous. In his view, many of the basic services are provided by the state, so it is easier for them to plan and implement rather than central government taking steps in each of them.
Mr. Narayan Ramchandran
Questions asked by Prof. S.L. Rao sought clarification on what does it mean by labor intensive organized manufacturing, steps taken by government in manufacturing in context of union budget 2015-16. He also seek answers on how hundreds or thousands of people will be converted into skilled people under NSDC project.
Mr. Narayan has given 2 regions for reduction in corporate tax. First, majority of the countries where India seems to compete in investment have lower tax rate, so it is better to show case to investors that India is becoming a competitive nation. Also this lower corporate tax rate will be helpful for the small companies, as in terms of % basis, their marginal tax rate is quiet higher. But he was cautious enough to tell that this does not mean beginning of liberal tax reduction. This budget can also be seen as eco system planning to provide environment for people to work much better. He welcomed the idea of post phoning GAAR. Clubbing of FII’s and FDI’s is a good step.Inviting talent from outside the government to strengthen banking sector is a good step but compensation has not been changed, which can raise some concerns. NSDC made good progress in skill development, though the number is still the fraction of what it has aimed once.
Dr. Narender Pani
Prof. S.L. Rao requests to throw more light on the agricultural sector, about which only few lines have been said in the current budget. He also asked about the feasibility of social security schemes, especially since now they are going to become direct cash transfer schemes.
Dr. Pani started his speech by highlighting perspective of the Union Budget. As the oil prices have reduced and inflation under control, this is best thing any finance minister can have for the first time in preparing the budget. However, he said that when entire world economies are slowing down, Make In India initiative somehow needs to redirect also towards sell in India. With increase in domestic tax, this budget will work against everything by cutting in the domestic demand.He also bring out a fact of reduction in gross domestic savings, making fiscal deficit a matter of concern. On the concept of direct cash transfer, he highlighted that so far not much has been done to check leakages in transferring money. With whole process going to be automated, it will be more easy to steal money in future. It will be a very inefficient system, if proper checks and balances are not put in place. With not much money allocated for rural research, agricultural sector did not get much needed boost.
Mr. S. Krishnaswamy
Mr. S. Krishnaswamy started his speech by highlighting that too much money is used only to pay interest. We are already in debt trap as fiscal deficit is also funded by the loans. He also highlighted human development index to be brought in context when talking about growth oriented budget, it does not need to be always linked with GDP numbers. In his view,population is asset, but emphasize must be given to the physical infrastructure but not just to the intellectual stuff. He then simplified some of the tax system incorporated in the new budget and what it means for individuals like me or for others.
These discussions were insightful and gave glimpse of what it was in the Union Budget of India 2015-16 for me as an individual as well as a professional.
– Event page at Bangalore International Centre website
Disclaimer Based on the observation of the author.