Text book Darnomics
Clearly the opposition did not share Dar Sahab’s optimism regarding the state of the economy or the scope of the budget. They rejected it almost out of reflex action, which is why government benches were dismissing the dismissal as pre-planned.
But with the Economic Survey laying the growth trajectory bare, and a lot of information about the budget already doing the rounds, the opposition had plenty of time to prepare its response. It would have helped if some of them had bothered to present shadow budgets of their own to back their arguments, but there is weight in some of their arguments.
Why raise next year’s growth projection to 5.7 pc, for example? When the last fiscal’s 5.5 pc was missed by such a wide margin (4.7 pc), what revolutionary provision have they made to enable such robust growth this time? And they are still confident of reaching seven percent in the year after.
They do this every year, of course; fail to meet the growth target and then raise it even higher the following year. The same is true for taxes, exports, etc. This is the main reason that the budget document has lost its significance. It is a one-day issue at best.
The agriculture package is welcome, of course, but the finance minister would do well to remember that this is a reactionary step, meant to stabilise a sinking sector, not a value-add on a moneymaker. And, also, it’s not as if the government can boast much success in dealing with agri issues. It was not too long ago, after all, that it funneled Rs341b into the much hyped kisan package. The result has not been much to write home about, to say the least. But now that more targeted steps are proposed – like Rs700b in agri loans, low mark-up, etc – it seems some lessons have been learnt. With industry performing well in the outgoing fiscal, even a measured focus on agriculture would have bolstered growth considerably, especially since the exogenous environment helped keep the deficit in check.
It’s far more important, though, to turn taxes and exports around. With the IMF program gone – and only the local market to borrow from in the new fiscal – it will be important to raise revenue, especially if the 3.8pc deficit is to be realised. And the 12pc proposed increase in taxes, unfortunately, is just a slogan; just like Dar Sahab has done at every other budget speech whenever taxes have come up. With the number of filers declining, there is no way the government can effectively expand the tax net; unless the finance minister has more unbudgeted indirect taxes in store for later in the year.
This budget was hardly any different, therefore, than the previous year’s. It came after dismal performance on all important indicators and posted yet higher targets for the next year. And, with the exception of agriculture, there is hardly any serious, quantifiably improved, focus in major areas. With the international environment now changing – oil has begun shifting as well – the government might find itself in tight situation one year from now.
