Regarding the adjustment, it has to be said that the tax-benefit for domestic industries is a bit favourable. But I can’t see any change in the case of expenditure structure. Only 1.83 per cent of GDP is allocated to the education sector; health sector got only 0.83 per cent of GDP and 0.84 per cent of GDP is allocated to social safety nets.
Our proposal was to increase the rate of allocations in accordance with the GDP growth rate. But that has not happened. The amount of subsidy has increased and PDB will get the lion’s share of that allocation. This allocation includes the unfair advantages given to some idle power plants in the private sector.
The amount of subsidy has increased and PDB will get the lion’s share of that allocation. This allocation includes the unfair advantages given to some idle power plants in the private sector.
The government, however, has fixed GDP target to 31.5 per cent in a measured way. For the first time, the government expenditure has been decreased in comparison to GDP. On the other hand, the projection of GDP growth remains unchanged at 7.5 per cent. As a result, the calculation of the GDP, which is not an indicator of real economic situation, has turned into a sort of political indicator. Once again my analogy between the GDP and a flyaway kite is proven.
The budget has targeted bringing down the inflation rate to 5.6 per cent. But there is no indication on how the inflation would be brought down from 6.3 per cent to 5.6 per cent. Controlling the import of luxury items will yield a little result. At the same time, the scope to shrink expenditure flow is also small.
Despite attempts to bring consistency to different tax rates, it seems ultimately the budget has become contrary to tax justice. The corporate tax rate has been decreased but at the same time, the tax-free income ceiling at the individual level has not been increased – which highlights a narrowness in the government’s outlook.
At the same time, opportunities have been given to legalise wealth siphoned off abroad. Though it has been termed as “wealth acquired abroad”, that wealth was actually siphoned off from the country abroad. Such a decision would raise questions in this financial year that is approaching the election (12th parliament election), especially when illegal wealth of expatriates is being probed into. The significance of such a step is greater at this time.
Also there is doubt as to whether the money would be brought back following this step. Neither is it certain whether anyone would believe this. This proposed step indicates who are the most influential quarters in the government – when the poor people would not get more than 1 per cent of GDP as allowance from social safety net, the influential quarter would get the opportunity to bring back their laundered money from abroad.
Needless to say, this would be an unwarranted political question for the ruling party during this time of economic crisis.
* Debapriya Bhattacharya is a distinguished fellow at CPD
** This analysis, originally published in the print and online edition of Prothom Alo, has been rewritten for English edition by Shameem Reza