Farm cess threat to State finances: Isaac

‘Union Budget clueless on disturbing economic issues’

The proposed agriculture development cess in the Union Budget will be counter productive on the finances of States, as the share from the divisible pool will decline from 42% to 32%, Minister for Finance T.M. Thomas Isaac has said.

Delivering the inaugural address at a webinar on ‘Economic Survey 2020–2021 and Union Budget 2021- 2022,’ jointly organised by Gulati Institute of Finance and Taxation (GIFT) and Departments of Economics, Government Women’s College and University College here on Friday, Dr. Isaac said that most of the proposals for revenue mobilisation in the Union Budget would negatively affect the State government’s finances.

Dr. Isaac said instead of raising the excise duty on petrol and diesel, the Centre had opted for hike in additional excise and special excise duties of these products. These additional duties did not include in the divisible pool. The decrease in the divisible pool would affect the revenue of States, he said.

“This affects the fiscal federalism badly and poses severe threat to the Centre-State relations,” he said. Allocation for the poor had dropped and the proposals in no way answer the serious economic crisis facing the country.

Pointing out that India is the worst performing country among emerging economies, he said the shrinkage in the global economy during 2020-2021 was 4.5%, while in India it was 7.7%. This was the worst economic recession India ever had, he said.

Dr. Isaac said the Budget was clueless on the disturbing economic issues. It never gave a healing touch to the poor and this would further worsen the status of the poor and middle class. The Union Finance Minister should have adopted a counter cyclical approach, he said

Even during the pandemic, the Centre’s expenditure increased on a minimum level. This approach may endanger the conditions of the poor in the near future, he said.

M.A. Oommen, Honorary Professor, GIFT, said the Budget badly ignored the unorganised sector. It would take more than a decade for the poor to regain their economic level to the pre-COVID-19 period. The idea of ‘minimum government and maximum governance’ itself was contradictory, he said.

Achieving ‘V’ shaped growth envisaged in the economic survey would not be possible as the 11% growth target was unrealistic. Achin Chakraborty, Director, Institute of Development Studies, Kolkata, gave a special address.

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