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Capital Grapevine 
Capital Matters

Capital Grapevine 

Virendra Kapoor

With huge majority, the first of five budgets of Modi – 2.0 could have broken fresh ground

Finance Minister Nirmala Sitharaman got the symbolism wrong. Going back to ~ bahi-khata~ in the electronic age, when even ~aadhtiyas~ have discarded the cumbersome ~bahis,~ did seem rather incongruous. A briefcase is always handy to carry papers and small files, especially the FM’s Budget speech. She ought to have stuck to it --- everything our colonial rulers did need not be discarded. Just when the focus is on digitizing all facets of governmental activity, Finance Minister carrying a ~bahi~ on the most important day in her annual calendar does seem rather odd.

Given that this was the first budget of a government which had just won another five years in power, she could have been bolder in pushing the reform agenda, lowering corporate taxes across the board, doing away with irksome exemptions which deface the entire tax system and provided fillip to mid-level businesses and industries to grow. Farm sector reforms did not find a mention, but labour reforms found a weak one, with the entire cache of laws being reduced to four codes, (whatever that might mean since we do not have the details). Seethraman leaned in favour of incrementalism, the trademark of the Modi Sarkar.

First, the ubiquitous common man. Given sops in the interim pre-election budget, he is now called upon to pay more for petrol and diesel whose cascading effect on price-line might however be modest given the prevailing low inflation. But aam aadmi stands to gain from higher interest subsidy on home loans availed up to March 2020. A 2.5 percent hike in gold import duty might hurt if he still buys jewellery for his children’s weddings. Otherwise, it is a salutary step to wean Indians away from a wasteful custom, though smugglers too will be happy unless we can clamp down on their nefarious operations.

Tax-payers will welcome the interchange of Aadhar and PAN card for filing tax returns and will approve the elimination of a human interface in case of scrutiny of returns. Hike in import duties on a few select items is unlikely to hurt the aam aadmi. Holding fisc in check at 3.3 percent signals a tight control on expenditure – or relying on extra-budgetary sources such as higher dividends from the RBI, cheap borrowing from foreign markets on issuance of sovereign bonds and of course Rs 1.05 lakh crores from selling dud public sector units. This will help her boost infrastructure spend. Nitin Gadkari’s allocation for roads and highways may have actually reduced but is likely to be more than compensated by the proposed cess of Rs one per liter on petrol and diesel for the vital sector.

At a time when the global economy is slowing, when red signals emanate from the US-China trade war, Brexit, war-like noises in the Middle East, etc., the plummeting domestic growth required an export-push. A special effort ought to have been made to attract foreign investors keen to relocate from China due to higher costs and rising uncertainty. A package of sops with an eye on major global behemoths has been offered but is unlikely to persuade them to set up shop here in the absence of a holistic environment. She ought to have been still more ambitious, especially when the presence of global brands has a huge spin-off effect on the ancillary sectors.

Also, corporate sector is unlikely to be pleased with the reduction of promoter shareholding from 35 percent to 25 percent, which will oblige marquee names to offload a huge chunk of shares in the market. This at a time when the promoters of a major private sector bank are still engaged in a bitter legal battle to retain a higher than 35 percent holding. Mercifully, the return of wealth and inheritance taxes was a false scare. But corporate biggies have been targeted by the increase in surcharge up to seven percent for those returning income of Rs. five crores or above.

Without the revival of the corporate sector the goal of an eight percent growth, as envisaged in the Economic Survey, will remain a pipe dream. It is good that the 25 percent corporate tax has been extended to companies with a turnover of Rs. 400 crores as against the earlier Rs. 250 crores. This leaves out only 0.7 percent companies to pay the old 30 percent tax. The latter will more than cover the loss occurring from extending the benefit of lower taxes to companies with Rs. 400 crore turnover.

Yet, if the share markets felt underwhelmed, it was a signal that being the first budget of a government which had just won a huge majority it could have done much more. It belied the expectations of the corporate sector still struggling to emerge from a debt crisis, reduced demand, high capital costs and a poor credit off-take. Vital sectors such as auto, steel and cement, real estate are in the grip of a slowdown but looked in vain for incentives.

However, a welcome move is to get the RBI to regulate the reckless non-banking financial sector. Startups have won major incentives and the confusion over income and capital gains from premium pricing of shares is cleared. To push electrification of vehicles, and reduce dependence on fossil fuels, huge incentives are offered to realize the goal of a complete switch to only electric two-wheelers by 2022. But our problem with the Budget in particular and the government in general is that instead of going in whole hog for reforms --- economic, including land and labour, capital markets, et al --- it has settled for an incremental approach. At this rate, we will continue to play catch-up with China indefinitely. And not realize the goal of a $ five trillion economy by 2022.

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The speech that launched a career…

Mahua Moitra, the TMC MP feted by the members of the Khan Market gang following her maiden speech in the Lok Sabha , protests that she did not plagiarize the speech from a popular American magazine. She has filed a breach of privilege notice against the editor of a television channel who alleged she had lifted the speech from the Washington Monthly. It is her claim that her speech came ~ from the heart~.

A few incontrovertible facts. The Washington Monthly published the said column in its issue of January 31, 2017. The headline was: `Twelve early warning signs of fascism.’ Mahua mentioned seven. But then she could not have mentioned in the Indian context ‘ rampant sexism’ while she compressed a few others to make its seven to make it a handy seven instead of the original twelve.

Now about that claim about the speech coming `from the heart.’ Several years ago, the capital’s leading English daily published a column by its editor which ruminated about what goes in the minds of flyers stuck at airports. Turned out that the editor had virtually lifted the piece from an American paper, only taking care to replace the Los Angeles airport with the Delhi airport. Found out, his defence too was not different. He claimed he had read that piece years ago and ` unconsciously internalized it.’ The owners promptly sacked the plagiarizing editor. Of course, Mahua need not fear, our ~netas~ are quite blase about these things.

By the way, that poster in the U.S. Holocaust Museum she referred to was there only for a few days and has since not to be seen. It is highly unlikely she saw it herself. Yes, there was another difference between her speech and the Washington Monthly column. The columnist referred to the poster at the very beginning of his piece, Mahua referred to it at the fag end of her speech.

However, if her speech did come from `her heart’ why is she blind to those very signs in West Bengal where Mamata Banerjee hounds out anyone who says a word edgeways against her. Even Modi did not force a widely respected group editor of a leading publishing house to seek anticipatory bail for fear of arrest on flimsy grounds and oblige him to quit editorship. His brother, now in command, runs the paper as if nothing bad happens in West Bengal, while under Modi there is only catastrophe and death, nothing else. Mitra can profit looking nearer home.

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Pilot as hands-on Congress boss

Here is tomorrow’s news today. If all goes well, Sachin Pilot should find himself tasked with the job of Congress revival. With Motilal Vora as the figurehead, whose frail and bent ninety-year-old frame did not prevent him from trying to touch 49-year-old Rahul Gandhi’s feet --- in the photograph Rahul seems to be making no effort to stop Vora --- Pilot might well be the Working President of the Congress Party. Crucially, the Congress `revival plan’ has the nod of the country’s top corporate robber whose influence is truly omnipresent. This way Ashok Gehlot will be rid of a constant thorn in his side. But, if the reports are to be believed, he is not happy at the prospect of his deputy becoming a key organizational figure from where he could plot against him. Two plus two in Congress rarely makes four. Meanwhile, don’t think the Gandhis have shed the control over the family property. Not at all. Both Vora and Pilot will most dutifully report to the Family.