Budget strategy beyond reproach
Courtesy:- MALIK MUHAMMAD ASHRAF
It has taken care of all the segments of the society
The budgets that the governments all over theannounce annually are of immense interest to all segments of the society, as they embody strategies to propel growth in the economic and social sectors as well as the fiscal and monetary measures that not only provide necessary fiances to the governments for their obligatory undertakings but also affect economic situations of the masses in varying degrees. The judgment on whether a budget is good or bad is based on the overall impact that it is going to create in surmounting debilitating economic factors, developmental activities that it envisages to generate, the scheme of distribution of resources it contemplates and above all the range of relief measures that it stipulates for the poorer sections of the society.
The budget for 2014-15, the second by the incumbent, announced by the finance minister, like the budget for 2013-14 which was a trend setter in effect, also aims at reducing the budget deficit which is the mother of all economic ills, broadening of the tax base, lays greater emphasis on private-sector led growth through myriad of measures aimed at nudging and industrial activity in the country and protecting the poorer segments of the society.
It is an irrefutable reality that the present government inherited an economy in complete disarray. The grimness of the economic landscape warranted some tough and courageous decisions by the government in conformity with the ground realities, rather than politically motivated approach to appease the electorate and further precipitate the economic melt down. The country had a fiscal deficit of 8% of the GDP. There is an unqualified consensus on the point that for securing and promoting the wellbeing of the masses and sustaining the health of the economy, it is imperative to curtail this deficit through the only available options of cutting the non-developmental expenditure and broadening the tax net. The government did adopt a rational approach.
The government did adopt a rational approach. The economic management strategy implemented by the government has produced very encouraging results in all sectors of the economy though some of the targets, like revenue collection and pace of development envisaged in different sectors have not been met, as indicated by the economic survey. But the overall GDP growth of 4.1% does represent a substantial headway as compared to growth rate during the last six years, as a result of the policies aimed at promoting business and industrial activities within the country and attractinginvestment. Fiscal deficit has been brought down to 5.1% and inflation contained at 8.5%. The success of the government policies has also been endorsed by the IMF, World Bank and the Gallop Survey report for the year 2014.
The budget for 2014-15 in fact represents the consolidation of the gains made during the last fiscal year, winching the country out of the economic quagmire and setting the stage for a self-sustained growth in the years to come. With a view to broaden the tax base and moving toward terminating excessive reliance on foreign borrowing, the government has set an ambitious revenue target of Rs2810 billion which would be supplemented by non-tax revenues of Rs319 billion. A conscious and deliberate effort has been initiated to bring the fiscal deficit down to 4.1 per cent by the end of the financial year.
The share of direct taxes in the new tax regime would be 66% per cent, a measure which apart from generating more revenues would also help in containing inflation. Bringing retailers and other non-tax paying sectors into the tax net through direct taxation is a commendable effort. The measures announced by the government would also help in documenting the economy. Increase in the development allocation and defence budget are good necessity-driven steps. Similarly, incentives announced for the exporters, investors and foreign investment in the form of reduction in corporate tax are right steps towards nudging economic activity in the country. For these measures, many critics are terming the budget as pro-business community and rich segments of the society. The notion is rather exaggerated. The concessions and incentives given to the business community are necessity-driven policy initiatives which were needed to create conducive conditions for the revival of business and industrial activities in the country and injecting new steam into the economy.
The government has not neglected the poorer sections of the society and has announced a number of steps to promote their well being and providing relief to them. The allocation under the BISP has been increased from Rs85 billion to Rs118 billion, with monthly support enhanced from Rs1000 to Rs1500. The government servants and pensioners have been given10% raise. Though it might seem insufficient to the relevant circles but the fact remains that it is more than the rate of inflation recorded during the year. The resource constraint faced by the government also did not permit any benign action. Provision of house building loans to those who cannot afford to construct a house for themselves through their own resources, the contemplated scheme of health insurance and already initiated measures for the youth are commendable moves towards well-being of less privileged classes.
The most redeeming factor in regards to the preparation of the budget is that the government consulted the business and industrial community and other stakeholders in regards to the imposition of new fiscal measures. The business community has already endorsed the budget proposals. My personal view is that the budget has taken care of all the segments of the society. It may not have addressed all the problems in consonance with the wishes of all the stakeholders, but it is the best possible effort in view of the prevailing economic situation of the country. The vision and strategy to achieve economic objectives, both in the short and long term, is simply beyond reproach. Economic management is not an easy task and even the governments in the most developed countries are never able to satisfy all the people all the time.