The Budget does attempt many things and sets ambitious targets — some stated and some unstated. The government, however, has set for itself a set of difficult tasks to implement. There are significant changes in the information technology regime, for instance. However, such targets will require day-to-day monitoring by the finance minister, for the forces of legacy within his administration will not make his life easy. But you cannot fault a Budget for being ambitious in terms of implementation.
What are the top-most unstated items? The first is bank recapitalisation, which could be within Rs 3 lakh crore and would need to be completed by the end of this regime’s tenure. But that would be compensated by other items, such as spectrum sales or proceeds from public sector share sales as well as privatisation. At the same time, simply recapitalising banks without identifying people and processes that were responsible for the mess would be unwise — and unethical. The finance minister could have done more on this front.
At present, there is a massive growth slowdown, irrespective of what the numbers show. Key sectors, such as manufacturing, construction, trade and agriculture, are suffering, despite what some ministers tell us. And there is a slackness in demand, which does not appear to be going away anytime soon. The government must be under immense pressure to go in for a splurge in the expenditure and an increase in subsidies and tax exemptions. That it has not done so shows this government is tough enough to manage some serious self-discipline. By not breaking the fiscal targets, the government has managed to send the right signals across the world and, more importantly, to the Reserve Bank of India. The country will start to see a fall in interest rates much sooner, as a consequence, despite unfavourable global conditions. The resulting growth will be far more stable and sustained than one that is artificially created through government largesse.
Merely spending more does not help either welfare or sustainable growth. In health care, for instance, India would need to put in place a strong public delivery system of basic universal health care. But without the economic and administrative ability, simply allocating more resources will only lead to wastage and create a bigger mess, as the experience with many schemes has shown. So, the focus needs to be on improving the administrative machinery and its tools.
The Direct Benefits Transfer scheme appears to be working well and may be expanded. The Mahatma Gandhi National Rural Employment Guarantee scheme is being strengthened and expanded. Improvements in the tax regime, not to mention Aadhaar, are to become the core of a social security system. Each of these items is indicative of a budgetary exercise that is getting significant support from efficient implementation in various ministries. We need more of such improvement in terms of details.
Arun Jaitley’s third Budget is, therefore, very different from the previous two. It is also in a different class from all that has emanated from the finance ministry since May 2014. The biggest difference is that it goes into the details and attempts to simplify many things from the bottom up. These will pay off in a massive way, though some of that payoff will be delayed. Yes, there is also clutter, some unnecessary exemptions, some unnecessary taxation, some unnecessary expenditure items and some pointless commitments. But, I would let that go; it is a political document, after all.
The writer is an economist