"We are what our thoughts have made us; so take care
about what you think. Words are secondary. Thoughts live; they travel
far."
—Swami Vivekananda (Indian, 1863-1902)
Word for the day
Katzenjammer (n)
Uneasiness; anguish; distress.
Malice towards none
If RaGa kurta is torn, it does not affect him, as he or his
family do not have to pay anyone for anything.
First random thought this morning
Budget 2017: High service tax to align service tax rates with
proposed GST rate of 18% and withdrawal of a multitude of exemptions for
business assesses so that the marginal rate of tax could be brought down to
target 25% are two agenda that need to be pursued in right earnest. These will
definitely result in marginally higher incidence of taxation for businesses.
Though, in medium term the benefit could more than mitigate the damage.
Knocking at wrong door
The finance
minister is like CFO of a business corporation. His job is to keep account of
the receipts and expenditure of the government; manage resources necessary for
executing the plans approved by the Cabinet; ensure optimum utilization of
available resources; and keep adequate provision for meeting contingencies.
He is accountable to all the stakeholders, insofar as the
transparency of accounts is concerned. His discretions are however limited to
choosing the sources of revenue needed for executing the plans of the
government.
In specific Indian context, FM has to decide how much resources to
raise from (a) taxation; (b) sale of national assets; and (c) borrowing.
In taxation, a balance has to be maintained between direct and
indirect taxes to keep the incidence of tax just and equitable.
Sale of national assets (mines, airwaves, PSE shares, land etc.)
has to meet the criteria of sustainability, development, transparency,
viability, socio-political expediency; etc. and depends heavily on the current
market conditions.
Borrowing depends on consideration of fiscal discipline, servicing
capacity, and market conditions. Historically, we have borrowed from domestic
lenders only. However, in recent years the role of foreign lenders has been
rising; the exchange rate volatility has therefore become a consideration. The
FRBM Act also guides the extend of borrowing.
The importance, or otherwise, of the annual budget presentation
must be seen within this framework. Although, the attention that is paid to the
annual budget speech has diminished in past decade or so, it still evokes
intense interest from the financial market participants. I feel it has more to
do with the marketing success of business news channels rather than anything
else. A number of TV shows are hosted to propagate an environment of
expectation, hope and fear amongst market participants.
The anticipation, that is sometimes far beyond the realm of
reality, guides the market volatility. The representatives of various interest
groups and lobbyists for pressure groups demand from FM, what he has no jurisdiction
to give. For example, someone asks FM to allocate more money for infrastructure
spending. Whereas, this request should logically be made to the concerned
ministry and departments, which shall make a plan, and get approved by the
cabinet. FM will be obliged to provide resources for a plan approved by the
cabinet. A defiance could see him losing his job.
I believe that it is high time that the development agenda of the
government be completely separated from the budget presentation. Let budget be
an accounting exercise with a reasonable degree of predictability and
transparency.
Let public appraisal of the development agenda be a
continuous process through regular reporting by the concerned departments and
ministries.
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