Chorus of Dissent on Budget, Says Chidambaram Citing PMEAC, RBI

Here is what the economists have said about Budget 2018.

3 min read
Former finance minister P Chidambaram. 

A chorus of dissent against the Union Budget 2018-19 has grown and even economists of the government, Vice Chairman of NITI Aayog and the RBI Governor have spoken against its provisions, senior Congress leader and former finance minister P Chidambaram pointed out on Tuesday, 13 February.

In a series of tweets criticising the Budget, the former finance minister cited recent statements by Prime Minister Economic Advisory Council (PMEAC) members Arvind Panagariya, Rathin Roy and Surjit Bhalla; NITI Aayog Vice Chairman Rajiv Kumar and RBI Governor Urjit Patel.

Chidambaram added, “Every economist of the government speaks against budget provisions.”

Here is the ‘chorus of dissent’ by the economists that Chidambaram is referring to:

‘Dr Arvind Panagariya Speaks Against Protectionist Custom Duties’

In an article in the Economic Times on 12 February, Panagariya had expressed reservations over the government's new trade template in the budget. The former vice-chairman of NITI Aayog criticised the increase in custom duties and warned that more tariff hikes were likely.

Panagariya criticised the protectionism heavily and even compared it to the License Raj.

For those of us old enough to remember the India of the 1960s to the 1980s, this is deja vu. Thanks to ultra-high protection and tight internal regulation, India was condemned to per-capita growth rate of less than 2 percent during 1950-51 to 1990-91. Sadly, a new generation of bureaucrats seems to have now replaced its more enlightened predecessor. It is on course to erect the wall of protection all over again.
Dr Arvind Panagariya

‘Dr Rathin Roy, Member, PMEAC Joins Dr Panagariya’

Rathin Roy, a member of the Prime Minister's Economic Advisory Council (PMEAC), had expressed unhappiness about the relaxation in fiscal deficit target as per an Economic Times article on 13 February.

The business newspaper quoted Roy saying that India is headed for a financial crisis in the next 10 years if remedial action wasn’t taken.

Our credibility has been impacted because of our inability to meet our commitments.
ET quoted Rathin Roy as saying

‘Dr Surjit Bhalla, Another Member, PMEAC, Speaks Against LTCG’

Chidambaram also tweeted that Surjit Bhalla, another member of the PMEAC, has spoken against long-term capital gain tax on stocks and mutual funds.

In an interview with CNBC-TV18, Surjit Bhalla had said, “The imposition of the long-term capital gains (LTCG) tax doesn’t provide the government with much revenue.”

We are in a very competitive world, things are completely globalised and it is very difficult for a country to chart out a protectionist course, and in my view, that is not advisable. The government can get a total revenue of Rs 5,000 crore from LTCG tax. It does not fit the revenue maximisation bill and the tax revenues that are obtained are way outlandish from what I understand.
Surjit Bhalla to CNBC-TV18

‘Dr Rajiv Kumar, Vice Chairman, NITI Aayog Hopes That These Measures Are Temporary’

The NITI Aayoug Vice-Chairman Rajiv Kumar had said that he ‘hoped’ that the higher tariffs in the Budget were a ‘temporary phenomenon’, the Economic Times reported on Tuesday.

Kumar added that ‘Make in India’ has not been successful and he urged PMEAC members to inform Prime Minister Narendra Modi about their worries about the Budget.

Make in India has not been as successful as we had thought and therefore the Budget has taken the route of greater import tariffs to give manufacturing a targeted approach like we did in the case of Maruti (Suzuki). I hope the EAC-PM is sending a memo to PM on the wrong choices made in this year’s Budget as two of its four members are saying so.
ET quoted Rajiv Kumar as saying

‘Dr Urjit Patel, Governor, RBI Warns of Five Taxes on Capital’

Amid controversy over the government proposal to tax LTCG from equities, RBI Governor Urjit Patel had said on 7 February that there are five different taxes on capital which impact investments and savings, PTI reported.

There are five taxes on capital and that would obviously also have an impact on investments and savings decisions.
RBI Governor Urjit Patel

‘World Stock Exchanges Protest Government-Inspired NSE/BSE Restrictions on Sharing Data’

The move by Indian exchanges – BSE/NSE, to stop licensing its products and data to bourses abroad would put foreign investors in a tough spot, a Reuters report said.

“This marks a step back for the India market’s internationalisation,” Margaret Yang, a market analyst for CMC Markets in Singapore told Reuters.

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