Budget 20-21: Disaster in Substance and Optics
This government appeared to have aced propaganda, publicity and media management since 2014. But the way the Union Budget has been handled shows a complete breakdown of these very skills. 
 
Forget about breakthrough ideas to unleash the ‘animal spirits’ of Indian business and accelerate economic growth, Budget 20-21 was a disaster even in terms of optics. It has created an unenviable record of being the longest Budget speech in 70 years (2 hours and 43 minutes), despite the last two pages being ‘considered read’ because the finance minister (FM) Nirmala Sitharaman felt unwell by the end of it.
 
 
Even as social media was quick to adjudge the speech as boring, a video of Union power minister RK Singh, apparently struggling to keep himself awake, while positioned just behind the FM, went viral, making matters worse. Mr Singh declared he was doing ‘eye exercises’ in parliament to ‘improve blood circulation’. But the damage was done. Take a look.
 
 
All this has to be seen in a context. Ms Sitharaman’s previous Budget was so poor that it embarrassingly got unravelled over the next three months, through a series of press conferences to announce rollbacks. This time, the ministry was supposed to be better prepared after a series of well-publicised pre-Budget meetings (albeit some with the prime minister (PM) at which the FM was not present).  
 
But things are worse this time. The fusillade of rollbacks and clarifications began within hours of the speech and economic experts continue to pick apart the numbers of revenue and tax collections. 
 
The BSE Sensex did a see-saw of 1,000 points after the Budget, especially when mutual funds turned big buyers on Tuesday. It is not clear if it is because they are expecting more roll-backs; but the gloom and bewilderment continues. 
 
The government hates any criticism and PM Modi has already lashed out at critics saying, “attempts were being made to mislead people on the Union Budget,” but the post-Budget reactions from industry and commentators suggest that people are unwilling to be silenced anymore. 
 
 
At a recent post-Budget meeting, realtor Niranjan Hiranandani minced no words when he attacked the “lack of total clarity, lack of demand, lack of liquidity and tax terrorism” that industry has to deal with. The rating agency CRISIL was equally blunt. “What makes this ‘shrinking’ feeling stranger and last longer is the long-overdue financial sector clean-up, at a time when the economy is suffering from other ailments,” said its review.  
 
Investment adviser and writer Harsh Roongta was at his sarcastic best when he said, the FM deserves a ‘round of applause’ from the investment and tax advisory community, because almost every taxpayer will need their services. The HR (human relations) head of a large business conglomerate spoke about how they may have to set up help-lines to counsel employees on which tax regime would be in their interest. 
 
This is the exact opposite of what Ms Sitharaman claimed in her Budget speech. It also shows a shocking lack of appreciation or understanding of people’s inability to deal with constantly changing rules and compliance requirements. 
 
Needlessly Misleading 
Even where the government was experimenting with a new tax structure leading to lower income-tax (I-T) for certain income segments, the FM caused needless confusion and anger by preferring hyperbole to straight talk and explanations. Ms Sitharaman prefaced her direct tax segment with a quote from Kalidasa’s Raghuvamsa: “Surya, the Sun, collects vapour from little drops of water. So does the King. They give back copiously. They collect only for people’s wellbeing.
 
She went on to announce “a new and simplified personal income-tax regime wherein income-tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions.”
 
The promise of “significant relief to the individual taxpayers” clearly implied that it would apply to all those who opt for it. But chartered accountants (CAs) totted up the numbers and quickly discovered that many would end up paying higher taxes. 
 
At a post-Budget press conference, the finance secretary asserted:“I am not saying it (new scheme) will benefit everyone. It might benefit 30%-40%of the people. But, even if it is benefiting 30%, then also it is a big thing.” These, he said, are mainly senior citizens, new entrants to the job market and maybe some small businessmen and shopkeepers. 
 
Wouldn’t it have made sense for the Budget speech to say that it is experimenting with a new tax regime that will offer the option of paying lower taxes to just two classes of taxpayers or about 30% of taxpayers? Why make tall claims and trigger outrage and negativity? Immediately after the Budget, the FM admitted to the ‘lack of clarity’ and said, “(t)hat is why we have started issuing clarifications.” That is not what a Budget is supposed to do—create confusion, which needs to be managed.
 
Finance ministry mandarins also claim that 90% of the 580 million taxpayers had claimed deductions of less than Rs2 lakh in 2018-19. But, with so many people picking holes in the Budget numbers, we will wait to see if this is true. 
 
Another botched up announcement related to taxing the overseas income of citizens who are not ordinarily resident in India. This triggered panic among non-resident Indians (NRIs) those who work in gulf countries that have no personal income-tax. Hasty clarifications have been issued after the issue was set to snowball.
 
Devil in the Detail
On many other fronts, the Budget seems to have worked overtime at making the lives of every segment of society difficult. High income earners as well as global Indians are outraged over the unfairness of dividend distribution tax to them as well as the change in ‘normally resident’ rules for NRI status. 
 
FM says she has axed 70 out of over a 100 exemptions and I-T deductions and intends to review and rationalise many more in the coming years. One impact of this, and a series of new compliances, will crush charities and foundations engaged in not-for-profit public services. They will have to spend huge time and money on government compliances while tax exemptions on donations are badly squeezed. 
 
In a country with no social security, a large chunk of people below the poverty line and a state incapable of delivering many public services, this attack on non-government organisations (NGOs) seems aimed at silencing and shutting them down en masse, rather than a selective clean-up. It is unclear how these seemingly vindictive provisions fit in with any of the three Budget themes touted by the FM: Aspirational India, ‘Sabka Saath, SabkaVikas, SabkaVishwas and Caring Society. Is it possible for the government to deliver on all of this through its own inefficient schemes and poor execution while cutting out help and support of private charities?
 
An Empty Charter
Even as it unleashed so much confusion over taxes, the Budget announced a ‘Taxpayer Charter’ to improve tax governance. It seems to be the brain-child of Sanjeev Sanyal, principal economic adviser in the finance ministry, who has been explaining it in a series of tweets. 
 
Did he notice that we already have a toothless Citizens’ Charter announced by RBI governor Raghuram Rajan in August 2014, which was only a motherhood statement with no intention of penalising banks for failure to abide by the Charter? 
 
The central board of direct taxes (CBDT) has already posted a tax charter on its website with timelines for resolving issues; but no prizes for guessing that there are no punishments, or consequences, for failure to implement its provisions. 
 
With stiff tax collection targets and policy-making in the hands of the tax department, it is no surprise that even Mohandas Pai, former CFO (chief financial officer) of Infosys and unabashed cheerleader of the government is sceptical. “Take away tax policy from CBDT,” he tweeted.
 
 
Mr Sanyal may have noticed that India also experimented with a tax ombudsman scheme but successive governments been extremely tardy about even appointing people to the posts. The Right to Information (RTI) Act also acted as a redress tool for a while, but that too is being defanged. This makes it difficult for us to get excited about a mere announcement of a Tax Charter, even if it is ‘enshrined in the statutes’ as the FM has promised. 
 
We can dig up many such details and inconsistencies across various segments of the Budget speech—but what it adds up to is a government that is not in listening mode, out of touch with issues on the ground and far away from delivering either the caring or vikas that it has promised. Of course, it has been so for many decades now. And that makes this regime just as insensitive as the previous ones. 
 

Comments
sanjeevnandaofficial
4 years ago
With all the commotion surrounding the budget going on, the real motive of an 'announcement' seems to have lost its meaning. The ministry could've easily posted their allotments through various outlets in print - the reason that the FM stands before the house and speaks, is to give the citizens a report card of how the country has performed in the last fiscal year, with genuine comments about the highs and lows sprinkled in between.
Having said that, the longest Budget announcement since the 50s, offered no catharsis whatsoever. Citizens were left confused and baffled. What the FM talked about made less airwaves than what she carefully omitted out. There was no talk about the unemployment, neither the flailing automobile industry. This practice should be eradicated in favor of a printed release. That way we wont be left more confused by the budget after, than before we came into it.

~ Sanjeev Nanda, Financial Advisor
prime
4 years ago
This really got me laughing: "PM Modi has already lashed out at critics saying, “attempts were being made to mislead people on the Union Budget". " At least he was honest about that one ;)
mohitmahawar007
4 years ago
Whole article looks like a Twitter rant rather than an objective assessment. The bar of quality is much higher for Moneylife.
sanjeevnandaofficial
Replied to mohitmahawar007 comment 4 years ago
I honestly liked it for this very reason - being off the cuff made the article even more cathartic. It was in-depth and well written
S.SuchindranathAiyer
4 years ago
I could not have put it better myself. Essentially, the Government is run by incompetent corrupt Neta-Babus who formulate and implement ideas based on ivory tower assumptions without any understanding of ground realities and existing action systems.
imkhushi.dubey
4 years ago
these are sheer experiments by political parties, they will make our condition worse till the last year of the tenure , and on the last year revive back these things to make it look populist and these forgetful ppl may vote these crooks... its a planned strategy, chk out who the financial advisor is :)
suketu
4 years ago
Empty vessels make the most noise.
Recently Modi has taken full credit for GST as well!He thinks it a success and that speaks for himself and his party.
Nasir Ahmed Rayadurg
4 years ago
Simple things are being made complicated and every past regime has meted the same treatment to taxpayers, this regime too is no different. Economic experts made so many suggestions for propelling us to the next 1/2 of 21st century, nothing has been heard and actioned, alas we are left way behind.
Harish
4 years ago
Very Good Article. I also remember one industrialist saying before the budget that we were in for a [positive] surprise on budget day. It was a surprise all right!
Suketu Shah
4 years ago
What was the need to do the drama of calling India's top 20-30 Industrialists from Mumbai to Delhi by Namo for their suggestions on the economy when not a single suggestions was implemented.We regularly find a bunch of lies everyday bny Namo himself in political speeches.This budget is just a reflection of the way namo runs the country or wishes to run-by fooling everyone in the country.

Nirmala Sitharaman shd not be blamed.This has Budget has Namo written all over it.
P M Ravindran
4 years ago
Since my forte is not finances I can hardly comment on many of the criticisms listed here. But yes, I know that making choices on which tax regime to accept does certainly require more effort than following just one that is thrust on you. But I was justifying it on the ground that over a period of time the various deductions would be done away with and we will have a simple cost to employer (?) kind of figure that would be taxed. But still the rumors about doing away with income tax and introduction of a consumption tax made better sense.

I have a doubt about one figure- the 580 million in the statement 'Finance ministry mandarins also claim that 90% of the 580 million taxpayers had claimed deductions of less than Rs2 lakh in 2018-19.' It cannot be just IT payers and it cannot be all the indirect tax payers either. So where does this figure come from.

Now to my subject- the RTI Act. The critic says 'The Right to Information (RTI) Act also acted as a redress tool for a while, but that too is being defanged.' Being defanged? You have got it all wrong, madam. The RTI Act, has been designed just to provide a rehabilitation home for some blue eyed babus of the government after their retirement from regular employment, with the pay and perks of Chief Election Commissioner/ Election Commissioner for a job that is simpler than that of a munsif in our judiciary. As one who had petitioned the President of India to remove the first Chief Information Commissioner of the Central Information Commission and the Governor of Kerala to remove the first Chief Information Commissioner of the Kerala State Information Commission under the relevant clauses of the RTI Act, my indulgence in RTI Act now is purely with the aim of exposing the idiots and traitors among public servants where idiots are defined as those who do not know the job they are paid to do and traitors as those who know it but would not do it.
Aditya G
4 years ago
The budget is becoming irrelevant with each passing year. It's one of those vestiges of colonialism that needs to go. The best way to approach is to iterate through the year and pass amendments & laws in forthcoming parliamentary sessions as and when required. This makes policy making much more flexible.
sanjeevnandaofficial
Replied to Aditya G comment 4 years ago
Somebody Finally Said It!
prime
Replied to Aditya G comment 4 years ago
Totally agree. Mixing government balance sheet, projected expenses and revenues with corporate and personal taxation in one giant smogfest makes no sense at all.
vipin agarwal
4 years ago
In addition, surprised to see Deemed Income provision for Salaried class as Perks not needing Simplification and liberally being used to Armtwist to pay more tax ( PF taxation being new addition). Wonder why we still tax Motor car ownership as Perquisite ?? Can FM explain why an Individual earning over 10 cr as Agriculture Income not be called Super Rich?? Why temporary Surcharges and Cess become permanent ? Why FM shows tax rate without such Surcharges and Cess in Budget Speech? Every year FM sets new Vision overlooking what happened in previous years? Extremely peeved to see complete absence of Vision to Shape up the Economy surrounded with opportunities but plagued with apathy and indifference to Reality Checks !!
Prasanna
4 years ago
Legislation to be introduced of Income-tax Act should not be in the hands of the Tax regulator. They have made a mess of the new provisions in the Income-tax Act. In some places it is down right absurd. For instance every seller whose turnover is more than Rs 10 crores is required to collect tax @ 0.1% from every buyer who buys goods of more than Rs 50 lakhs. Why???? Does not Govt. have linkages of GST database with Income-tax data bases? This is stupid. There are many instances of the Budget being unfair and unreasonable. Did I hear ease of living? This is living in Income-tax made HELL. Less said the better. GOD help India and GOD help its citizens (including Non Residents who will now be taxed on their world income in India) from tax tyranny launched by Tax Officers whose attitude does not change. It is a down right stupid and idiotic budget.
vipin agarwal
4 years ago
In addition, surprised to see Deemed Income provision for Salaried class as Perks not needing Simplification and liberally being used to Armtwist to pay more tax ( PF taxation being new addition). Wonder why we still tax Motor car ownership as Perquisite ?? Can FM explain why an Individual earning over 10 cr as Agriculture Income not be called Super Rich?? Why temporary Surcharges and Cess become permanent ? Why FM shows tax rate without such Surcharges and Cess in Budget Speech? Every year FM sets new Vision overlooking what happened in previous years? Extremely peeved to see complete absence of Vision to Shape up the Economy surrounded with opportunities but plagued with apathy and indifference to Reality Checks !!
Arpita Padiyar
4 years ago
budget was disappointing ☹️
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