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Economy

Budget 2021: Colourful but hollow

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Budget 2021 Colourful hollow

ABRAR UL MUSTAFA

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Young Kashmiri banker winsBudget 2021 was paperless. It was presented from a tablet. Before the budget announcement, there were widespread speculations about an upswing in healthcare, fiscal harmony, education, vaccination, and joblessness. Economists had a hybrid sentiment concerning fiscal levelheadedness and the ration of resources. While some economists surmised in fiscal tactfulness, others foretold unpacking of spending spans. Some other economists thought that GDP transition, fiscal vocation and spending can linger; joblessness and health have to be dealt with. Monday’s Budget was an endeavour to stay balanced and cover all perspectives. It was triumphant to a tangible breadth. Yet, it circumvented many fundamental matters like Education, Employment and Tax.

The introductory and leading highlight was the outlay for the healthcare vicinity. From a minuscule allocation of 96,000 Crores, this sector is going to win a mega carton of cash as gigantic as Rs 2.23 lakh crores. This is a whopping upgrade of 137%. Hopefully, now common man will be in a position to avail of better healthcare services. We, however, will have to gaze and gawk how the policies are carried out in verity. Besides, this allocation is going to be bolstered in the future years as affirmed by the Finance Minister. Succeeding acuity of Monday’s Budget was Rs 35,000 Crore crate for corona vaccination. On a flip side, nonetheless, we have rationales to surmise that it may be beguiled. That is because, several sub-sectors—that are not directly healthcare sectors—have been accommodated. These are areas like Aayush, etc. This has to be scrutinized in the coming days when there is unmistakable translucence.

Our incomes are axed by taxes. We needed a robust and comprehensive financial policy. We need clear-cut employment, education, livelihood policy. The policymakers at the helm of the affairs should devise practical strategies.

There were a few exemptions concerning Income Tax Return (ITR). Those senior citizens who are over 75—and are earning only pension and bank interest—are exempted from filing of returns. This does not mean that there is any concession in tax for such people. It is just a respite regarding who has to file a return. Likewise, ITRs for the salaried class would be prefilled with the earnings from salary and bank interest. This would make the filing of return slightly easier. These are not concrete windfalls or exemptions.

One of the heftiest punchlines of Sitharaman’s budget speech was that of Fiscal Deficit. She announced that the Fiscal Deficit is pegged at 9.5%. She also added that this gap would be narrowed down to 4.5% in the years to come. An economic analysis, however, makes it clear that this would not be a cakewalk for the NDA government. She said that the government would resort to borrowings and would approach the market to fulfil the announced appraisals. This, however, seems unlikely. All governments so far have been unable to maintain a narrow fiscal gap. Hand in hand with fiscal discipline and balance, the government has shifted its gear towards spending. This is in line with what was predicted.

There were some statements in the Fin Min’s speech which neutralised each other. For example, she induced an agricultural cess over petrol and diesel. This additional cess was, on the other hand, neutralised by a reduction in import duty. This would leave the overall effect over the prices of petrol and diesel unchanged for consumers. On the same lines, an additional duty was announced over imported apples, etc. This is also unlikely to affect the prices of domestic produce. The overall impact of these changes is negligible.

A ’Bad Bank’ has been introduced. According to Sitharaman’s speech, it would be a new bank that takes care of the bad debts of other banks. It would be like shaking the balance sheet of other banks, accumulate all bad loans and put into the Bad Bank. For now, the idea seems promising. It would focus on the recovery and management of Non-performing Assets (NPAs). The other banks may carry out normal business without bothering about their bad debts. How constructive the plan may prove would depend upon the capital infusion, policy framework, execution and other details of the newly proposed bank.

Moving toward the disinvestment and privatisation front, it has been a lamentable budget. To the amazement of any sane economist, the government announced that an Insurance Company and two Public Sector Undertaking (PSU) banks would be privatised. In common parlance, it means it is going to auction its assets. Their reasons are not reasonable. If some banks are not in a strong position, it doesn’t mean you would sell them. You need to make a targeted and planned intervention and cure their rotten balance sheets. Deal cannot resue. Who sells assets, after all? In multiplication to this, disinvestment will be made in the Life Insurance Corporation (LIC). Where are we heading to? It is just like selling an aeroplane and buying a kite. It would fly for some time. But it would soon come tumbling down. Tough times are truly ahead. On the other hand, a layout of Rs 20,000/- Crores as a capital infusion to Public sector banks has been made. This is aimed at making them able to comply with the regulatory norms.

On the social impact side, some budget outputs would affect common masses. There is a vehicle scrapping policy. Now, old vehicles that are more than 20 years old—and 15 years in case of a commercial vehicle—will have to pass a check before they are allowed to ply on roads. If they fail—which is quite a possibility—you will have to sell it and buy a new car. Another option is to station it in a corner of your courtyard and keep it fresh for memory and display! Coming onto what a common man asks after every budget: What is dearer and what is cheaper? Well, gold and invaluable metals are now cheaper. TV sets, Washing Machines, LED lamps, Air Conditioners, etc will be expensive. A common man and a middle-class man needs food, shelter, clothes, some affordable gadgets. These are dearer now. However, fair news comes for those whose wedding is in the offing. Buy gold now or wait for some more days. The yellow metal is going to get cheaper.

Postscript:

A government is for the people. It must listen to the people. The public has been reeling under joblessness. The education of our children is in the doldrums. Their future appears uncertain and dark. Our incomes are axed by taxes. We needed a robust and comprehensive financial policy. We need clear-cut employment, education, livelihood policy. The policymakers at the helm of the affairs should devise practical strategies. They must not beat around the bush. Hope good sense thrives in the days to arrive.

The author is an MBA, NET, IBPS qualified. He works as Manager Scale-II in the Middle Management of a reputed PSU Bank. The views are personal

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Economy

Omicron, economy and budget deficits

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Omicron economy budget deficits

Dr BinishQadri

The World Health Organization on November 26, 2021, labelled variant B.1.1.529 a variant of great alarm, named Omicron, on the advice of WHO’s Technical Advisory on Virus Evolution (TAG-VE). Extensive evidence was presented to this advisory that Omicron has several mutations affecting its behaviour.

Research is coming up at different levels to get hold of different aspects of Omicron in a better way.  There is much ambiguity about whether there is more transmission in Omicron as compared to other variants, including the Delta variant. South Africa has seen the number of people testing positive increasing as a result of this variant. Many epidemiologic studies are in progress that aims at knowing if the positive cases are rising because of Omicron or some other factors.

One of the biggest aims of economies is resource allocation involving a balance between our priorities and competing needs so as to get the most suitable economic action. Any fiscal policy demands a judicious attitude in pursuing the goal of resource allocation and distribution. Fiscal discipline should reduce fluctuations in income, output, and employment.

Whether it is omicron or anything else the fact is that all facets of the current pandemic have in one way or the other way affected economies of the world in general and underdeveloped in particular. It is very important to correct all economic and social odds.

Fiscal indiscipline is an important characteristic related to all shocks of all times and COVID19 is no exception. Fiscal indiscipline implies that our governments are not maintaining good fiscal positions that coincide with macroeconomic stability and economic growth that is all-inclusive and sustained. Borrowing in large numbers and amassing debt like anything are enemies of every economy. The dual actions are responsible for the creation of fiscal crunches. To achieve the target of Fiscal discipline it is necessary for governments to maintain fiscal positions that are consistent with macroeconomic stability and economic growth that is sustained by letter and spirit. In order to create and maintain fiscal etiquette, there should be an avoidance of debt accumulation and excessive borrowing.

One of the biggest aims of economies is resource allocation involving a balance between our priorities and competing needs so as to get the most suitable economic action. Any fiscal policy demands a judicious attitude in pursuing the goal of resource allocation and distribution. Fiscal discipline should reduce fluctuations in income, output, and employment. COVID19 and all its variants no doubt have generated fiscal indiscipline which is why all governments should be prudent to create ‘‘budgetary beanbags’’ to combat all shocks and disturbances and to deal with anticipated economic and fiscal burdens.

Economists surveyed by Reuters argue that economies should emphasize fiscal judiciousness as there is a declining trend in the Indian economy. Lead Economist at Emkay Global Financial Services, Madhavi Arora argues that Omicron and the allied bad repercussions have a short end and is in no way a long-lasting wave.

A fiscal deficit connotes a gap in a government’s income compared with its spending thereby meaning that there is a fiscal dearth in the government spending beyond its means. There is a dip in the fiscal deficit from 135.1% in the April-November period of the previous financial year to 46.2% in the current financial year. There is a need for fiscal consolidation and all the fiscal policies carried out by the government at all levels must aim at reducing their deficits and debt stock build-up.

In order to understand Omicron and its impact on the Indian economy and other emerging markets, planners need to Google and start thinking about consolidating their budget deficits post COVID19 years. They need to include a series of fiscal responsibility laws, fiscal guidelines, and fiscal assistance (dynamic organizations in particular).

The strategy and implementation policy, alongside economic (fiscal) and political commitment are necessary and sufficient conditions for the effective strengthening of fiscal discipline during shocks.

Dr Binish Qadri is an assistant professor at the Department of Economics, University of Kashmir. You can reach her at [email protected]

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Economy

UAE delegation announces establishment of Kashmir Business Centre in Dubai: KCCI

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Kashmir Business Centre in Dubai

Malik Nisar

Srinagar: To facilitate J&K-based startups and entrepreneurs in Gulf countries for opening their operations, the UAE-based visiting business delegation has announced to open Kashmir Business Centre in Dubai, Kashmir Chamber of Commerce and Industries (KCCI) said in a press conference on Tuesday.

A 30-member UAE business delegation is on a four-day official visit to Jammu and Kashmir to explore the investment opportunities in the region.
President, KCCI, Sheikh Ashiq said during an interaction meeting with the local business community, the UAE-based delegation announced that a Kashmir Business Centre will be set up in Dubai for providing support to J&K-based entrepreneurs and connecting them to the relevant people there.
Ashiq said, KCCI not only welcomes the announcement but with the consent of the government will try its best that it materialises. He said the centre will also prove fruitful for a large number of youth, who go there in search of jobs.
Secretary General of KCCI, Farooq Amin, added that the business centre will provide an opportunity to young entrepreneurs who want to explore their new ideas but do not find them viable here. He said these new entrepreneurs will get the chance to explore their innovative ideas in the global market. The business centre will be more kind of an incubation facility, he added.
Amin said some of these youngsters have already presented their business ideas in the meeting and received applause from the UAE delegation. They will now directly contact these young entrepreneurs and will invest in their business.
Sheikh Ashiq said they are also mulling to send a J&K business delegation comprising of all the sectors to UAE for exploring the market for various kinds of produce and handicrafts there.
While welcoming the delegation for their investment proposals in J&K, KCCI hoped that local businessmen will be also included in their plans.
Ashiq said the delegation will also prove beneficial for the tourism promotion of the region as they will spread the word about the beauty and culture of Kashmir.
“We also told them that we need more international connectivity and we want global market should open for our people. Through these initiatives the unemployment rate can be brought down,” Ashiq said.

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Economy

Editorial | Ambitious Budget

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Ambitious Budget

Ambitious Budget | This week Union Finance Minister Nirmala Sitharaman presented the third consecutive annual budget of J&K in the Lok Sabha. The J&K Budget is required to be passed in the Indian Parliament as the newly formed Union Territory continues to be under the President’s rule and due to the absence of the Legislative Assembly in Jammu and Kashmir.

The finance minister presented an outlay of about Rs 1.13 lakh crore for the J&K Budget 2022-23. The budget has seen an increase of about Rs 4500 crore from the budget estimate of the financial year 2021-22. However, the revised estimate for 2021-22 shows an increase of Rs 10,000 crore.

As per the revised estimates for 2021-22, there has been a huge shortfall of estimated tax collection and other resource generation, which has proven a big handicap for the J&K Government in fulfilling its development targets.

In this year’s budget presentation, like the previous one, the focus has been put on the capital expenditure – the portion of the estimate spent on asset creation and infrastructure building, which is a positive development. However, the biggest challenge, as witnessed in the previous years, is that despite allocating funds in the budget for various sectors and projects for development works, there is either lack of resources or the inability of different departments to spend the allocations.

Take the example of Jal Shakti or the Public Health Engineering Department. In the budget of 2021-22 highest capital expenditure of Rs 6346 crore was allocated to Jal Shakti, which was more than a 400% increase. But the revised estimate presented by the Union FM shows that only Rs 2107 crore were spent, which indicates either lack of resources or an inability of the department to undertake the development works. However, a deeper analysis of the budget documents and other publicly available information suggests that both the unavailability of funds and the incapability of the administration to spend are the reasons behind it. The same is the case with many other government departments.

The revenue receipts were short of almost Rs 13,000 crore as per the budget estimate of 2021-22. Similarly, the fiscal deficit during the same period rose to Rs 16,456 against the target of Rs 10,647. The debt to GDP ratio has increased to 53% as compared to 46% in the financial year 2020-21.

As per the revised estimates for 2021-22, there has been a huge shortfall of estimated tax collection and other resource generation, which has proven a big handicap for the J&K Government in fulfilling its development targets. The revenue receipts were short of almost Rs 13,000 crore as per the budget estimate of 2021-22. Similarly, the fiscal deficit during the same period rose to Rs 16,456 against the target of Rs 10,647. The debt to GDP ratio has increased to 53% as compared to 46% in the financial year 2020-21.

The J&K Budget 2022-23 has set an ambitious target of asset creation and infrastructure development in the UT. If there are no unspent budget allocations and all these targets are completed, J&K will witness remarkable changes in the development front.

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