Intent right but path unclear : Vanam Jwala Narasimha Rao

Intent right but path unclear

Vanam Jwala Narasimha Rao

Telangana Today (15-07-2019)

In the Union Budget presented by Nirmala Sitharaman to the Parliament for the year 2019-20, there are quite a few positive measures which according to the Government would propel India towards a US $ 5 trillion economy by 2024.

While all these are necessary, certain fundamental reforms which require major engagements with the states in the area of factor markets such as land, labour, credit, agriculture as well as services such as education and health care are conspicuously missing. While the fiscal arithmetic and the growth assumptions made appear to be optimistic, the Government of India needs to encourage states like Telangana, the youngest, newest and dynamic state of the country so that the nation can progress in the true spirit of cooperative federalism. 

Replicable Good Schemes

At a time when Indian farmers are under stress and rural economy is going through tough times, Telangana introduced path breaking “Rythu Bandhu” scheme through which 52 lakh farmers are given Rs 10,000 per acre as investment support for agriculture per annum in two instalments, before Khariff in June and before Rabi in November. The scheme has received much appreciation and by design is far better than PM Kisan Samman. PM Kisan should have been further improved to give meaningful investment support to the farmer so that his or her income is increased.  

Formation of 10,000 new farmer producer organisations is a welcome move. What is most needed on the marketing side is a more effective implementation of MSP (Minimum Support Price) system by extending the procurement be central agencies to more crops and expanded coverage. Taking up cold storage and godowns infrastructure on a massive scale would enhance capital investments in rural areas. In Telangana, warehousing infrastructure fund of NABARD was effectively utilised and the godowns capacity has been increased by 8 times in four years which can be replicated.

Way to Water

Formation of Jal Shakthi ministry which has been given the mammoth task of providing piped drinking water to all rural households by 2024 is again a welcome move. The mission is called as Jal Jeevan Mission with an initial focus on 256 districts and 1592 blocks.

In Telangana through Mission Bhagiratha piped water is being provided to all 24,000 rural habitations and 80 lakh households through an innovative and much lauded water grid scheme. The scheme had a Rs 42,000 crores of outlay. If the union government wants to meet the targets set under Jal Jeevan Mission, the budgetary allocation of Rs 10,000 crores seem to be grossly inadequate. Further, Telangana should also be provided an incentive as recommended by NITI Aayog for completing the scheme by mobilising the resources. Once again, Telangana shows the way for the country with its visionary leadership and state capacity to deliver.

Another important task of Jal Shakti Mantralaya is to do rainwater harvesting and ground water recharge. Here again Telangana has been a trail blazer with Mission Kakatiya wherein 40,000 tanks were taken up for rejuvenation and were completed in three years. Here also NITI Aayog has made a recommendation for provision of financial assistance and the Government of India has to provide the same to the state.

Humane Approach 

Pradhan Mantri Karam Yogi Maandhan Scheme aimed at providing pension benefits to three crore retail traders and shopkeepers is a welcome move. The budgetary allocation to national social assistance programs for which a meagre Rs 200 per month is being provided to old age persons that too only to around 6.67 lakh persons in Telangana needs to be increased. The state with its own resources provides Rs 2016 per month to all old age persons and Rs 3016 per month to all differently abled persons in all benefiting 47.88 lakh persons. 

Pradhan Mantri Matsya Sampada Yojana to address critical gaps in value chain is welcome. In Telangana the Government has taken up similar measures to increase the production and productivity of freshwater fish. With the completion of Kaleshwaram project, the state will have some of the largest reservoirs in the country and is working to increase the fish production in these reservoirs. The best practices of Telangana may be replicated elsewhere too.  

Restructuring of (National Highways Authority of India) NHAI, public private partnerships in railways, blue prints for gas grids, water grids and regional airports are welcome measures. However, unless the fundamental issues in risk sharing in PPP projects are resolved, the land acquisition process made simpler and quicker, stalled projects would continue to lock up valuable financial resources. These issues need to be addressed. In Telangana the Government had made certain state specific amendments to the land acquisition act, thereby making it faster and easier to acquire lands by providing better compensation to the project affected and displaced families. This humane approach has led to completion of projects in a record time, thereby saving thousands of crores of tax payers monies. This can be replicated.

Providing 1.95 crores houses under PM Awas Yojana is a welcome measure, but the insistence on using only beneficiaries from SECC data is creating a hurdle for the states to access these funds. This condition may be relaxed as Telangana has taken up a massive 2 BHK program to provide dignity and privacy even to the poorest Indians.

Taxing Issues

The disinvestment target appears to be very high. Reduction in corporate tax to 25% should have been made to all companies instead of just to those who have a turnover of Rs 400 crores per annum. The increase in income tax for persons having a taxable income of Rs 2 crores and Rs 5 crores appears to be symbolic. As typically these people are businessmen who are also job creators, it may be a setback. All the measures such as, special assessments for start-ups, pre filled forms, faceless assessments, allotment of cases on a random manner which make tax payment simpler, transparent and painless for the citizen and businesses are welcome. The removal of angel tax and integration of PAN and Aadhar are welcome measures.

Increasing tariffs on a number of items is worrying. The Indian industry has to become internationally competitive cost and quality wise and that is the only way the exports are going to raise and take India towards 8% GDP growth. This is the only way make-in-India is going to happen.  Increasing tariffs would certainly lead to retaliatory increases from other trading partners and would ultimately cost the Indian consumer in terms of poor quality of goods. When India should be looking itself get integrated into the world’s supply chains and occupy the space vacated by China, this clearly appears to be a retrograde measure.

Borrowing abroad in foreign currency, though, a good move, however, the foreign exchange risk is to be managed through appropriate strategies and using hedging instruments. This would also reduce the crowing out and competition for domestic funds and would increase availability of credit to private sector through banking system, thereby giving a fiscal boost. The increase in price of petrol and diesel, by a rupee might add to the Union and State resources. However, this move simply means the consumer not getting the benefit of such move. To what extent this would add to inflation is also to be seen.  

Becoming a US $ 5 trillion economy would be a matter of pride for all Indians, though, the strategy and the tactics required to do so are not clearly spelt out in the budget documents.