Budget 2014-15: Maintenance of political stability key to success

A budget is an account of income and expenditure for a particular period of time. The budget 2014-15, which was presented by the Finance Minister in the parliament on the 5th of this month envisages total expenditure of Tk 2.5 trillion against a projected revenue income of Tk 1.89 trillion. It means it is again a deficit budget like all other years and the extent of deficit is over Tka 610.00 billion. This is a sizeable amount by any standard and is just one-third of the projected income.  
Understandably, a large part of this deficit will be met from banking sources. As a result, money supply will increase which again will lead to price inflation. The government aims to meet the remaining part of the deficit through foreign loans and grants. Regarding foreign loan, our mindset is, the lesser the better. But at times it appears to be a better choice because of high interest rates in our banks.
The proposed budget contains a set of well-knit and well-oriented policies aimed at harnessing macroeconomic development by strengthening the micro base. For this, we will have to make efforts right from the word 'go', i.e., from the 1st of July, the beginning of the new financial year with full sincerity, honesty and transparency. For example, teachers and employees will have to be sincere in utilising the 13.1 per cent allocation made to education and technology. Without going into a debate over whether allocation for health sector is adequate or not, more attention should be given to improving sincerity and efficiency of doctors and nurses.  
Reduction of duty on cosmetics was not necessary. Imposition of super tax as a direct tax provides a good example of tax management. On the other hand, some decisions made regarding tax management appear to be wise. Levying super tax for the purpose of recovering direct tax is logical move. The NBR has to be recast and its management has to be modernised and standard improved. Loopholes down the system that paves the way for corruption will have to be plugged.  
In his budget speech, the Finance Minister informed that the total amount of black money in the country is Taka 5.0 trillion, which accounts for 81-82 per cent of total money supply. The black money is either secretly utilised for non-productive purposes or is lying idle. Over the years, black money has been growing in strength and has of late assumed sizeable proportions. Efforts should be made to stop accumulation of black money and the accumulators should be brought to book. Black money gives birth to black economy. The South American experience has shown us how pervasive the influence of black money could be in throwing a society to tatters by destroying law and order, unleashing widespread crime and tearing apart the social fabric. As a matter of fact, black money can be ignored for some time, but cannot be allowed for an indefinite period of time. This is a two-edged weapon which cuts you both ways. A judicious decision has to be struck on how long black money can be accommodated and when a clear-cut line should be drawn.
Due emphasis has been given to infrastructure development in the proposed budget. Proposal for development of road and railway sectors has been rightly made. At the same time, allocation of Taka 240 billion for construction of the Padma bridge from our own resources and the intention to complete the project by 2018 deserve to be appreciated. Provisions have also been kept for development of power and energy sectors. The government should be more watchful regarding quick rental power, which may be continued as a short-term measure. In the long run, per unit cost of power becomes exorbitant.
An increase in the price of fuel has been proposed, which does not seem to be all right in the present context.
The government intends to encourage private investment, but is either unwilling or unable to remove the bottlenecks driving the potential investors away. Bank interest rate remains to be a main stumbling block. Another major predicament is infrastructure which has to be developed to attract local and foreign investors.  Last but not least, political stability has to be maintained at any cost.   
In case of capital market, tax exemption for five years has been proposed for the two stock exchanges of the country. Income from profit up to Taka 15 thousand has been made tax free for the investors. For non-listed companies, tax rate of 35 per cent has been proposed. But for these companies, a proper system of supervision should be evolved. Policy direction should be given and appropriate steps taken for debt financing and financial derivatives to consolidate the capital market. But stock investors are set to be slapped with a 3 per cent tax on capital gains upwards of Taka one million in the upcoming fiscal year, as part of the government's efforts to meet the ambitious revenue target. Furthermore, for gains above Taka two million, a 5 per cent tax will be applicable. It will be a big dent for general investors whose capital gains from the stock market remained tax-free to date. The move comes in a bid to collect some revenue for the national coffer.
In order to strike a balance between import substitution and export-oriented industries, a number of steps have been suggested. At the same time, emphasis has been given to setting up of industries outside Dhaka. But no proposal has been made regarding tea and jute industries, which is surprising.
For 2014-15 fiscal, the GDP growth rate has been set at 7.3 per cent in the proposed budget. To achieve this target, the CPD observes, private investment in 2014-15 needs to be raised to Taka 750 billion. To that end, private investment needs to rise to 25 per cent of the Gross Domestic Product from the present 21 per cent. Possibility of achieving the targetted growth also will depend largely on political and law and order situation of the country.
On agriculture sector, area of per capita cultivable land is decreasing every year, necessitating use of appropriate technology more extensively. Total allocation for development expenditure in the Annual Development Plan is a little above Taka 860 billion. Our experience about ADP implementation is far from being pleasant. Most experts hold the ancient system, particularly poor monitoring, responsible for non-implementation or partial execution of a large number of projects over the given period of time. Therefore, the old system needs to be discontinued and replaced by a modern and digitally generated one. At the same time, system of monthly supervision should be introduced.
The budget has brought good news to local manufacturers of medicines, steel and fabrics as the government proposes to cut duties on raw materials imports. The Finance Minister has proposed to reduce customs duties on 40 basic raw materials used in the manufacture of medicines to a 5 per cent concessionary rate from the existing 10-25 per cent. The move will make substantial cuts in prices of medicine.
An amount of Taka 1.54 trillion has been allocated for non-development expenditure in the proposed budget. Not surprising though in view of our historical tradition, allocation for non-development expenditure is Taka 680 billion more than that of development expenditure. This will not only lead to price inflation, but can also encourage corruption. Efforts should be made to keep price inflation down as far as possible. Emphasis should be given to development of human resource and production of white collar labour.
Finally, the Finance Minister may have in his mind a soft corner for the poor and disadvantaged, but he has not been able to establish how this year's budget is going to benefit them. He has not given due recognition to the lack of governance in Bangladesh.
Moreover, there is hardly any indication in his budget speech of a strong measure that could help prevent recurrence of financial indiscipline in the national economy. Sadly, the government does not appear concerned at all over the ongoing downward slide in the capital market.  
The writer is a TV personality.
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