A SNAFU called “Budget India” 2015
Now that the dust has settled and all the financial analyzers
have mass mailed the good, bad and ugly of the Indian Budget for 2015; I have a
smile on my face. It’s not because I am in any kind of "I told you so" mood (read my previous blog); or that any of the announced policies will help me
save much on my taxes. I am pleased at the fact that the Indian Finance
Minister (FM) had not been swayed by either domestic or international pressure
to declare excessive reforms or giveaways or tax breaks that are great for swaying the stock markets to reach a new high and make a few investing punters excessively rich. The market did ride a wild roller
coaster on budget day; and once the fine print was read with a magnifying
glass, a sense of “calm” seems to have prevailed with quite a few saying "this could work". The budget presented was by and large realistic; a "patch the weak chinks" and "repair" the Indian economy one. No point in presenting a high on sound low on delivery tale to the people; though this one has some high drama built in it too.
Budget day is an annual fun or fear day for the 1.2 billion
Indians depending on which income divide that person is slotted in. The Nation seems to go into an economic uncertain phase 30 days prior
to D-day as though observing some kind of an inauspicious moon phase. This year was a bit
different. Rather than follow the same routine that would govern India’s
financial destiny for some 365 days; the FM actually took a bold step in
unfolding a road map for the next 5 years on how the Modi government intends to
run the finances of this Nation. Having set the broad tone of intent, the next
4 speeches should - in my mind - be more on “Accountability” where the Country would like to
hear what actions were taken and the outcome of the same with steps for course
correction where applicable.
There is enough out there on the net on what this year’s
budget will or aims to do for India, so there is not much that I will say about
it; except that, the government seems to be sticking to a plan to revive India’s
economy based on certain core “SNAFU” principles in a
slow but sure fashion; namely:
1.
Safe and Socially Secure India;
specially its borders, women and senior citizens.
2.
Neat Clean and Green India;
be it energy, environment, streets, homes or even its economy.
3.
Accelerating India; be it infrastructure, manufacturing
or agricultural growth.
4.
Financially sound India;
be it its Corporate(s) or the people employed in any sector.
5.
Unambiguous India; be it its policies for inviting
capital or tax laws.
(Intent being Situation Normal All Fired Up - Shame on you for thinking otherwise).
There is a better than average chance that these initiatives
just may succeed to take India into an orbit of double digit growth; and
hopefully the FM will not have to tweak the index year again to make his magic
number happen. Why the doubt? Because many of the great initiatives the Govt. wants
to put in place appear self defeating.
Let me give an example. In July of 2014, the government
announced the “Sukanya Samriddhi” account as part of the “Betti Bachhao Betti
Padhao” (save daughter – educate daughter) initiative to correct the gender
imbalance as well as ensure a better future for girls in the Country. Rightly,
no better incentive than economic to make it happen; and so the government offered
9.1% tax free interest on accounts opened by parents in the name of their
daughters. But, the minute this account became part of Sec. 80C of Income Tax;
it got into a pool that include pension and other tax saving investments to
compete with. For this initiative to succeed, it should have been kept out of
the 80C ambit with an annual investment cap that would not burden the exchequer
more than required. I cannot figure out why and how this scheme is allowed for
girls only up to age 10? Does the FM feel that after that age the girl child’s
future is well taken care of? Further, this concept should have been stretched.
It’s not just parents who need to be incentivized to bring up daughters; what
about ensuring the well being of daughters-in-law? Now this is the most
vulnerable class of women in most cases. Just think. On the economic front, the
in-laws never really transfer or create property in the daughter-in-law’s name
to keep her under “control”. If then, the daughter-in-law wants “out” of a bad
marriage, she has an uphill task in getting anything. Even her parents don’t
want her back. She needs some form of economic protection too.
Since I am in the advising mode; it was nice to see the FM’s
encouraging policies to drive people towards saving more for their post
retirement life, as well as “investing” in the increasingly expensive health
insurance. There are certain extra concessions for those over age 80. No issues
at all. However, in my view; people over the age of 80 should be taken out of
the tax net completely. First; a person of this age has already done his/her bit in
terms of serving the Nation and its economy. Not many people get to cross this age. Those who
do cross are seldom in a state of health to support their own selves
financially or avail the best (read expensive) medical treatment. In most
cases, their children of these octogenarians see them as a liability and their
living as an impediment to inheriting their valuable property; and it’s not uncommon to
read stories of ill treatment and worse being meted out to the super-seniors by
their very own. Now, turn them into a valuable economic asset for their family and all this may actually
change. Children will ensure a happy and healthy long life of their parents and
pray that they live up to a 100. Now bring the super-senior age down to 70 and
virtually all our Parliamentarians would be out of the tax bracket
(officially).
Indians are known to jump into the river Ganges to wash away
their past sins. In the bargain, the river has become an environmental disaster. The PM has the clean up of this river as a pet project having promised it to the people of Varanasi who made sure he wins his seat from there. While the budget has a policy for its clean up in place - how about using the fruits of the "Sins" (dirty – slush money) to clean up this and other
mighty rivers that are a source of water and life for this Nation? I think the
Govt. should come up with a punitive amnesty where a person can declare
unaccounted wealth by investing in “Clean and Green India Infrastructure" zero
interest (non discounted) bonds with a 7 year tenure which will be used for
cleanup of the environment – be it water, air or land. This would pretty much work like Cap Gain
bonds where those interested in avoiding Capital Gains Tax would invest in such
instruments. Else of course, pay the penal price for disclosure and
legitimizing the assets. I really wonder, how would public servants declare
their ill gotten wealth? Is this Country headed for a shut down if the FM is to
be believed that he will spare no one? So for now at least; till there is
clarity on the policy for cleaning up the underground dirty economy; a great majority
of the 1.2 billion people must be shitting rocks - it’s truly a state of SNAFU
(yes, that one which we all know) that most are in.
Rather than brooding over such highly intellectual matters
on which my mind has little comprehension and where my voice will never be
heard; let me make this blog a bit more useful by including a summary of the highlights of the Union Budget 2015-16 presented by Finance
Minister Mr. Arun Jaitley with my two bits on the side:
·
No change in personal
Income Tax slabs – Had the recommendations
of the original DTC (Direct Tax Code) been implemented the tax base and tax
compliance would have been far greater than it is today.
·
Health Insurance
Premium deduction hiked from Rs. 15,000 to Rs. 25,000; for senior citizens to
Rs. 30,000 – Hopefully the insurance
companies will not see this as an opportunity to increase premiums
substantially again.
·
Transport allowance
exemption hiked to Rs. 1,600, from Rs. 800 per month – Something is better than nothing and at the lowest rung quite useful.
·
Additional 2%
surcharge on people earning over Rs. 1 cr; to fetch Rs. 9,000 cr – I guess many bosses will use this stick as a
carrot to keep their keymen below the magic number.
·
Wealth tax abolished –
Super Sensible
·
Direct Taxes Code
(DTC) dropped – It was a stillborn from
day 1.
·
Rs. 50,000 deduction
for contribution to New Pension Scheme – Pragmatic
way to get savings up.
·
To lower Corporate Tax
to 25% over next four years – Ends uncertainty.
·
GAAR implementation
deferred by 2 years to April 2017 – No
comments
·
Service Tax rate hiked
to 14%, from 12.36% - Good and bad. Good
as it makes even those who don’t pay taxes contribute and bad for those who are
already paying 34%+ in taxes. It’s actually going to be 16% if the 2% Cess
kicks in. So is this a precursor to a GST to be set at 16%?
·
2015-16 growth between
8-8.5%, double digit growth feasible – Promise
no tweak in index year?
·
Retail inflation close
to 5% by March, room for monetary policy easing – Food inflation is near 100%. Have a heart Mr, FM
·
To achieve fiscal
deficit of 3% of GDP by 2017-18. Fiscal Deficit target 3.9% in 2015-16, 3.5% in
2016-17 – Requires sacking a lot of corrupt
fat and tightening the belt on wasteful expenditure by those who we call “Leaders”.
·
Revenue Deficit to be
2.8% in 2015-16 – No one believes it but
that’s fine.
·
Current Account
Deficit for 2014-15 to be below 1.3% of GDP – I hope someone has not employed the same advisors and bean counters that
Greece did to get it into the EU?
·
To introduce
comprehensive law to deal with black money – Good – great – but sadly the only way to do it successfully is an
amnesty scheme.
·
Benami property
transaction bill to tackle black money transaction in real estate soon. – With most builders-developers supposedly
being backed by… I am sure it’s obvious; will this really happen?
·
100% deduction for
contribution to Swachh Bharat, Clean Ganga projects – How will these initiatives be monitored and by whom? Seems like a lot
of good money will flow into the toilet and flow out into international waters
through the rivers making them dirtier.
·
GST to be put in place
by April 1, 2016 – if so, why was
excise duty not matched with rate of service tax right away?
·
Internationally
competitive direct tax regime to be put in place to incentivize saving – All ears.
·
Rs. 25,000 crore for
Rural Infrastructure Development Bank. – Superb
·
Rs. 70,000 crores to
Infrastructure sector – Does anyone believe
that with hounding of corporate India with a black money and forex witch hunt
this will be achieved?
·
Tax free bonds for
roads, railways, irrigation projects – Interest
rate will decide if this will be a success.
·
GST and JAM trinity
(Jan Dhan Yojana, Aadhaar and Mobile) to improve quality of life and to pass
benefits to common man – LOL –
really – how? Fake accounts – fake aadhar – and corrupt mobile men?
·
Housing for all by
2020 – Is someone assuming a static
population?
·
Govt. to create
universal social security system for all Indians. – What about the illegals?
·
Sovereign Gold Bond,
as an alternative to purchasing metal gold – For a person still wanting to keep money hidden – METAL rules.
·
New scheme for
depositors of gold to earn interest and Jewelers to obtain loans on their metal
accounts. – Then will the Sovereign Gold
Bond earn interest too?
·
To develop an Indian
gold coin, which will carry the Ashok Chakra on its face, to reduce the demand
for foreign coins and recycle the gold available in the country – At the end of the day, Gold will still have
to be imported for minting these.
·
Forward Markets
Commission to be merged with the Securities and Exchange Board of India – Good, more synergetic regulatory agencies should
be merged.
·
PAN card mandatory for
purchase above Rs 1 Lacs – Actually, spends
on credit and debit cards made mandatory for all goods and services priced
above Rs 25K and for a good measure the Govt. may throw in extra reward points.
