Privatisation Holds Key To Budget

If the current fiscal deficit of 3.4 per cent of GDP is to be maintained despite lower tax collections (including GST) and higher subsidy outlays, a serious effort at privatisation is necessary. The fiscal deficit in 2019-20 is likely to be around Rs 7.5 lakh crore

- Minhaz Merchant

EXPECTATIONS from Finance Minister Nirmala Sitharaman’s maiden Union Budget on July 5 have already been dampened by remarks from bureaucrats in the ministry of finance (MoF). Officials were quick to point out that there is no fiscal room to lower taxes. Corporation tax for large companies (with an annual turnover above Rs 250 crore) will stay at 30 percent. Personal income tax will not be lowered. Worse, MoF officials say, tax on long term capital gains (LTCG) – currently 10 percent for assets sold after one year – may be increased.

All of this points to what could be another dreadful Union Budget, in line with the six disappointing Budgets delivered by former Finance Minister Arun Jaitley. Ministry of Finance officials defends a status quo Budget by stating that Prime Minister Narendra Modi is firm on not allowing the fiscal deficit to slip.

There is one silver lining though that could light up the Budget. Modi has recently spoken of the need to privatize Public Sector Units (PSUs) to both improve their efficiency and garner funds for a revenue-starved exchequer. This eureka moment should have struck the MoF in the PM’s first term when “privatization” was made a mockery of by PSUs buying each other’s shares. The market value of over 85 PSUs listed on the Bombay Stock Exchange (BSE) is around Rs 18 lakh crore.