Budget Session, 2017: The good, the bad and the ugly
While the Prime Minister’s belated enthusiasm for GST is welcome, the Modi-Jaitley duo’s decision to junk due deliberation and debate on the Finance Bill is not
As I reflect on the recently-concluded Budget Session, I end up with very mixed feelings. There were certainly some silver linings. However, some crucial developments and the NDA government’s manner of conducting legislative business leaves me with a sense of dark foreboding.
This session marked a departure from the usual practice of presenting the Budget on the last day of February. The session was advanced to ensure that the appropriations under the budget would be passed by the end of the financial year, so that the government could get going on its expenditures from April 1 onward.
The session was also different because, for the first time, there was no separate Railway budget. Perhaps this is in keeping with the smaller share of the budget that the Railways gets nowadays compared to when the separate Railway budget represented the largest chunk of government expenditure and employment. But it does make it harder to probe deeper into how the Railways are actually performing and it is the government’s duty to ensure that the requisite numbers are easily accessible.
Prime Minister Narendra Modi was a strong opponent of the GST when he was chief minister of Gujarat. But this, and his other U-turns such as over Aadhaar, can be seen as signs of delayed but welcome enlightenment about what the nation really needs
The silver linings were the passage of numerous impactful bills. Foremost among them were four bills related to setting the stage for the implementation of the Goods and Services Tax (GST). This path-breaking initiative of the UPA government is finally becoming reality under the NDA. This may strike some as ironic, given that Prime Minister Narendra Modi was a strong opponent of the GST when he was chief minister of Gujarat. But this, and his other U-turns such as over Aadhaar, can be seen as signs of delayed but welcome enlightenment about what the nation really needs.
Other necessary legislations that were passed included the Maternity Benefit (Amendment) Bill granting mothers 26 weeks of paid leave after giving birth. The Mental Health Care Bill brings to center stage an oft-neglected dimension of health care. The HIV and AIDS (Prevention and Control) Bill strengthened the rights of people affected by AIDS.
All these bills represented an extension of the humane approach to public policy pioneered by the UPA Government, which had initiated many of these bills. None of them would have passed without the cooperation of the Congress and other Opposition parties, who have not stooped down to the desperate disruption demonstrated by the BJP when in opposition.
Damage control post-demonetisation
The budget itself was an exercise in damage control, post-demonetisation. It raised MGNREGA funds to account for the increased demand from migrant workers who had to abandon stalled construction projects in cities to return to their villages. It cut taxes for the lowest segment of taxpayers in an attempt to boost consumption, which has suffered during demonetisation. It cut taxes for micro, small and medium enterprises in order to cushion the shock they suffered from note-bandi. But even this will only help those who were profitable enough to pay taxes, while ignoring those who shut shop or can barely earn enough to pay interest.
Sadly, the budget did not provide sufficient impetus to a languishing farm sector. Even worse, the NDA government proclaimed that it was meeting fiscal deficit targets. But these have been achieved by continually increasing regressive indirect taxes that hurt the poor the most. Every time oil prices fell the government would raise taxes on petroleum products. This basically ensured that the benefits of lower crude oil prices would not be passed on to the people of India.
There was also nothing in the budget that can revive the floundering private sector. Credit growth is at a 60-year low as banks are hesitant to lend. And the private sector is wary of borrowing as a result of which investment and gross fixed capital formation (GFCF) continues to fall precipitously under the NDA government. It was 6.11% in 2015-16. In 2016-17, growth of GFCF plummeted to 0.57%.
Where are the jobs?
The net result is that new job creation is abysmal. Candidate Modi promised two crore jobs a year. The Labour Bureau reports that the actual number of new jobs created in eight job-intensive non-farm sectors between April and September 2016 is a measly 1,09,000.
The most disturbing part of the budget was the Finance Bill. Not its financial contents but the numerous amendments that were snuck into it which should have had no place in the Bill. Many of the amendments were introduced after the Lok Sabha had started its debate on the Finance Bill. Previous governments have sometimes also included non-finance-related items but those were mainly after consensus had been developed across parties. In this case, many of the MPs did not even get sufficient notice to make themselves aware of the nature and implications of the amendments.
Finance Minister Arun Jaitley, is reputed to be a lawyer with a mastery over the Constitution. Yet, through his amendments to the Finance Bill, he struck at the very institutional basis of India’s democratic framework by shortchanging the Rajya Sabha and the role of parliamentary standing committees. These measures should instead have been introduced as amendments to existing laws like the Representation of the People Act or Income Tax Act.
Changes to various tribunals, including mergers and changes in their employment terms were rushed through. Draconian powers were granted to Income Tax authorities who now can go after taxpayers without having to justify their actions with a ‘reason to believe.’ Aadhaar was practically made mandatory even for welfare schemes in a manner countering the original intent of the UPA and contrary to the opinion of the Supreme Court.
If these changes were not in the Finance Bill, the Rajya Sabha and the standing committees would have deliberated, debated and finally voted on them. Instead, because this was a money bill, the Rajya Sabha’s role was reduced to merely that of acquiescence. As a mark of protest, and as a constructive contribution, various amendments to the Finance Bill were passed by the Rajya Sabha. However, as expected, the brute majority enjoyed by the BJP in the Lok Sabha ensured that all these amendments were rejected.
When Jaitley made his budget speech in February, his mention of electoral reforms and the creation of ‘electoral bonds’ drew substantial applause as these were seen as badly-needed changes. However, when the ink dried and the nature of his electoral reforms became clear in the second half of the session, things have gone from bad to worse.
Through amendments to the Finance Bill, Jaitley has removed the cap on corporate contributions to political parties. Earlier, companies could donate 7.5% of their annual profits over a three-year period. Now there is no limit. Another change was that parties no longer need to disclose details of those who gave them cash donations below ₹2,000. Earlier it was ₹20,000. Those who funnel black money into politics only need to create 10 times more fictitious entries now.
Electoral bonds were touted as a way to ensure that parties raise only white money. These can only be bought in banks and then can be donated to specific bank accounts of political parties. Jaitley argued that the previous regime that allowed tax-deductible cheque donations had not worked because donors feared retribution from other political parties. Therefore, through the Finance Bill, electoral bond donations need not be disclosed, either by the companies or the recipients among political parties.
The stage is thus set for the government to use the tax authorities to arm twist companies to donate to the ruling party. Then, since no one would be the wiser as to who actually donated to the party, accusations of corruption and favoritism can be preempted
The stage is thus set for the government to use the tax authorities to arm twist companies to donate to the ruling party. Then, since no one would be the wiser as to who actually donated to the party, accusations of corruption and favoritism can be preempted. The doors are now open for crony capitalist capture of the political process. Opacity will thrive. No one can ‘follow the money’ and see who influenced what policy outcome. Electoral reforms have been turned into a joke. To continued applause in this post-truth era.
The brazen manner in which the NDA government continues to undermine institutions and weaken checks and balances leaves me gravely worried about the future. Beyond the legislature, the NDA government has found ways to weaken a range of institutions including premier academic institutions and the Reserve Bank of India. These are ominous signs.
As we look back at Budget session 2017, we must also look forward to a future of eternal vigilance to safeguard the institutions that have built India’s success story over the last seven decades.
Prof MV Rajeev Gowda is a member of the Rajya Sabha representing Karnataka and the Indian National Congress.
- Arun Jaitley
- Finance Minister
- NDA Government
- Income Tax Act
- UPA Government
- Budget 2017
- Representation of the People Act
- Finance Bill
- Prime Minister Modi