People pin hopes on benign budget

The officials should place themselves in the position of affected common man (they are no way affected as they continue to get full salaries and are enjoying all perks as usual) and view economics from the angle of strengthening the common man so that the economy can revive at a faster rate. They should forget the concept of increasing taxes on various goods and services. They also need to stop thinking and calculating figures based on what the situation was before the pandemic. For example, bars are biggest source of revenue earners. The States as part of unlock 5.0 have permitted opening of bars and restaurants. Has the footfall come to normal level? Bars are still witnessing empty tables. Majority of the tipplers are preferring to buy liquor of their choices and consume at homes instead of taking the risk of going to bars for two reasons - fear of contracting corona and non-availability of money

The outbreak of corona pandemic has brought in many changes in the lifestyle of the common man. It has adversely affected the economy across the globe and has also affected individual economy. Though the world is slowly opening, the fact is with a vaccine still a distant dream, one has to live with the threat of corona. The question is; will the governments think on taking proactive measures to see that the spending capacity of the individuals increases or not?

Every government, be it the Centre or the State, claims to be for the people, of the people and by the people. But that slogan ends once the elections are over. No government wants to lose even a rupee in the form of taxes but wants the common man to agree for reduction in wages. It also does not think of giving any kind of relief on interest on bank loans. On the other hand, it would love to reduce the interest on savings. Interest on credit card EMIs is about 21%. Interest on personal loans is 18% but when it comes to FDs, they give only 6.5% and one percent more in case of senior citizens.

It's time the Centre and States take stern steps to see that the consumption of goods goes up in the days to come. The markets need to be revived and for that measures to give back more money to the common man's wallet is must. With reduced salaries and mounting loan burden on the common man, the growth in consumption would continue to be sluggish. Even trade bodies are of the opinion that if more money is added to the pockets of the common man, the economy could witness more consumption and liquidity, and this would lead to positive growth which in turn would infuse new life to the shattered economy.

The Reserve Bank of India Governor Shaktikanta Das had stated that the repo rate and reverse repo rate will remain unchanged and the country's real GDP in 2021 is likely to decline by 9.5 percent. The real GDP growth in 2020-21 is expected to be negative at (-) 9.5 percent, with risks tilted to the downside (-) 9.8 per cent in the second quarter of 2020-21; (-) 5.6 percent in the third quarter; and 0.5 per cent in the fourth quarter. Real GDP growth for the first quarter of 2021-22 is placed at 20.6 per cent.

Pricing power of firms remains weak in the face of subdued demand. Covid-19-related supply disruptions, including labour shortages and high transportation costs, could continue to impose cost-push pressures, but these risks are getting mitigated by progressive easing of lockdowns and removal of restrictions on inter-state movements.

Now that it is time for the Centre and States to start working on Budget proposals, they should give a serious thought to take some revolutionary and progressive measures like agreeing for bringing petrol and diesel under Goods and Service Tax (GST). Yes, this would result in fall in revenue in terms of the high taxes which the states are now levying on these products but this would help in increasing availability of cash with the common man which he will be spending on other goods and the loss suffered here can be made up to great extent. States may argue that if the common spends on buying other goods, the States will get only the GST compensation from the Centre.

The officials should place themselves in the position of affected common man (they are no way affected as they continue to get full salaries and are enjoying all perks as usual) and view economics from the angle of strengthening the common man so that the economy can revive at a faster rate. They should forget the concept of increasing taxes on various goods and services.

They also need to stop thinking and calculating figures based on what the situation was before the pandemic. For example, bars are biggest source of revenue earners. The States as part of unlock 5.0 have permitted opening of bars and restaurants. Has the footfall come to normal level? Bars are still witnessing empty tables. Majority of the tipplers are preferring to buy liquor of their choice and consume at home instead of taking the risk of going to bars for two reasons - fear of contracting corona and non-availability of money.

If petrol and diesel are brought under GST, the Centre may have to forego about over Rs 20,000 crore or so which it now gets in the form of tax credit. States, on the other hand, want to keep a revenue tool in their hand. The Centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, States levy value added tax (VAT). The lowest being in Andaman and Nicobar Islands where a 6% sales tax is charged on both the fuel. Mumbai has a VAT of 39.12% on petrol, while Telangana levies VAT of 26% on diesel.

Increasing the taxes on fuel results in cascading effect on the prices of various goods in the market and ultimately it is the common man who is suffering the most. For example, Andhra Pradesh government has hiked the rates of petrol and diesel and the cost of fuel here is highest compared to other states. The local people of course have no choice but to buy petrol at the high rates but if you look at the issue from larger perspective, the transporters who consume diesel in bulk are finding ways to save some money though they do not pass on that benefit to the customer.

If a heavy truck has to carry goods from Tamil Nadu to Telangana, they buy about 400 litres of diesel in that State as the price is less by about Rs 3 per litre. With the tank full of fuel, they can easily cross the borders of Andhra Pradesh. They again get their vehicles re-fuelled in Kodad or Khammam where the fuel rate is less by Rs 3 per litre. Trucks going from Telangana side to Odisha buy fuel here and get refuelling done in Odisha. Officials claim that they knew of all such tricks and still according to their calculations, the State still earns more in form of taxes. But it is also a fact that they are losing heavily on account of fall in bulk consumption by the transporters. Hence a fresh look at all these aspects is must. The States should understand that still there are many sectors which are yet to open and even if opened, there is no guarantee that they will start generating revenue immediately. Take for example the Tourism sector. The industry continues to be under lockdown. This has affected the tour operators, the hotel industry and the transport industry. The Centre has so far not given any thought of reviving this sector and it also does not appear to be thinking of giving any exemptions to this sector.

Against the backdrop of this situation, it is time the Centre and States come with a budget that would be people-friendly and more practical than theoretical in approach. The Prime Minister too needs to pitch and see that the next budget would help the common man and the genuine taxpayers. Similarly, the Chief Ministers too need to make some exercise based on ground situation. Can this be expected from the political executive? Will empathy prevail over politics?