A missed opportunity
N. R. Narayana Murthy
Non-Executive Chairman and Chief Mentor
Infosys Technologies Limited
Never in the history of independent India has such a great opportunity presented itself to any government.
Look at the prospects for India: GDP growth at 9%, savings at about 32% of GDP, investment at 34% of GDP, tax growth by 30% in spite of a 20% increase in taxes in the previous year. All this called for very bold structural transformational moves changing the course of the economy of this country.
Yes, to some extent this has been addressed in the form of higher allocation for the social sector, for school education, for the agricultural sector, for our villages. But none of them is a bold move to change the context.
For instance, a 3-year plan could have been evolved to complete all irrigation projects all over the country to accelerate benefits to our farmers. This would reduce the stress on them. Allocation to irrigation has increased, but not to make any discernible change.
Higher education needed priority. A cess of 1% on all income has been levied, which could possibly yield around Rs. 5,000 crore, but a substantial part of that would go to fund investment to enhance seats to meet quota requirements. Giving scholarships to 100,000 children or enhancing grants to certain institutions is not going to transform India. I would have expected a scholarship scheme of Rs. 20,000 a year to fund the education of 1 million youngsters in colleges costing only Rs. 2000 crore. This would have been transformational. I had expected a policy of greater liberalization for higher education to change the context, but this has not happened.
To my mind, it is a budget which sets out to meet very many objectives – very incremental but not transformational. Opportunities like this are few and far between in the life of a nation. In the area of industry, indirect taxes make up between 24%-30% of the final cost of the finished good — obviously very high for an emerging country like India. A 4% reduction in the excise duty on all goods (excluding oil/oil products, tobacco products) would have cost the government about Rs. 20,000 crore but would have substantially increased industrial output and reduced cost and changed the context. It would have made Indian industry more competitive and increased employment. Yes, custom duties have been reduced in many areas as part of an ongoing scheme, and there are marginal changes here and there but none address fundamental issues. On the income tax side, economists have identified the challenge of the missing middle, and there is an immediate need to bring tax payers having income between Rs. 2.5 lakhs and Rs. 5 lakhs into the tax net and increase compliance and thereby enhance revenues. Tax slabs needed to be reset. Minimum tax liability sets in on Rs. 110,000 per individual, but for a family of four with one earning member this is less than the per capita income. Bold moves are required in the areas of administration, citizen services and governance to sustain growth.
Overall, the budget has missed a great opportunity to transform the economy.