Lowering customs duties further requires the introduction of the Goods and Services Tax (GST). On this front, unfortunately, the budget failed to offer a roadmap. Phasing in the GST has to involve elimination of the Central Sales Tax (CST). All that was done was a one-percentage point reduction in the CST.

The ethos of the GST is to move towards low and uniform tax rates on all goods and all services. But the speech was replete with tax rate changes that tinker with the fine structure of the economy in ways that are now well understood to be deeply harmful.

In a case of extreme mission creep, tax policy has been harnessed for price control by promising differential excise rates to cement producers based on the price at which they sell. Service tax has been extended to a few more services — in contrast with the ethos of the GST which involves taxing all services.

In a new initiative on education, the FM announced 100,000 merit-cum-means scholarships for secondary students from Class IX to XII. The emphasis on primary schooling has resulted in students finishing primary schools but the limited number of secondary schools in rural India prevents them from going on to secondary education.

In addition to addressing the immediate issue of schooling for these children, for the economy there are important long-term implications of placing public resources in the hands of parents. The emphasis on merit, through an examination, is well-placed given the difficulties that the country expects to face in the development of good quality labour supply.

... contd.