New Delhi: In the perennial tussle between Bharat and India, has the hinterland won? The pro-poor, pro-farmer, pro-small business proposals presented by Finance Minister Arun Jaitley in the Budget for 2017-18 surely seek to portray this government as a friend of the masses. Not of the classes, nor of big business. Rahul Gandhi’s stinging ‘Suit Boot ki Sarkar’ charg, leveled before the Budget presentation last year, has now been quite effectively negated with all that the Budget promises. To hammer in its pro poor leanings perhaps, Jaitley pointedly ignored one of the most persistent demands of India Inc. – that the government lower the headline corporation tax rate. The other long standing gripe of the suits, about eliminating Minimum Alternate Tax (MAT), was also passed over. To all intents and purposes, Jaitley sent out a clear message: the wealthy are to bear the tax burden for the less fortunate and the large corporations must bear the cross of taxes even as smaller companies get a relief.
Sure, capital investment has always been considered extremely important for the long-run growth of any modern economy. But current capacity utilization across sectors in India is around 67%. This means that there is substantial spare capacity and any move to artificially force investments into the system will lead to the kind of capital inefficiency that has brought China to its knees. Of course, as per the budget, overall capital expenditure is up 25.4% but most of that should be on infrastructure to support the theme of bringing the markets to the under-served.
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