Fiscal footsie: Jaitley's budget trades urban honeymoon for rural marriage

The three problems the FM is addressing are excess capacity in industry, slugging growth in small and medium enterprises and a general shortage of employment wrapped in an agrarian crisis

If R.K. Laxman had been around, he might have drawn a cartoon of  Prime Minister Narendra Modi and Finance Minister Arun Jaitley inside a helicopter spraying cash across villages,  with the iconic common man in his checked, tattered jacket, holding a newspaper that says "Cess for education, health increased."

It does not take much imagination to guess that the NDA government's last budget before the next general election is an attempt to please rural voters but what is significant is that it does not seem to have bothered about fiscal discipline, rising oil prices or the inflationary potential of fanning aggregate demand in the economy. It is clear that growth in general, and  employment and agricultural incomes in particular, have taken centre-stage with the elegant turn of phrase shifting from "ease of doing business" to "ease of living"

Anyone looking for an expression to dignify what is clearly an election budget tongues are wagging is that the finance minister's budget for the year to March 2019 is one that shows what I would call "Structured Populism".

To the minister's credit, he has tried to address a three-layered problem by abandoning a fourth one: fiscal discipline. At a missed 3.5% of GDP in fiscal deficit in the current year and a target of 3.3% in 2018-19 that is above the current year's missed target of 3.2%, there is a clear bias for lofted, inflationary strokes that might remind one of the slog overs in a Twenty20 cricket match.

The three problems he is addressing are excess capacity in industry, slugging growth in small and medium enterprises and a general shortage of employment wrapped in an agrarian crisis in which the past few years have tilted the balance against farmers. Here is the fairy tale scenario: rural spending will fan industrial demand and thus growth, while generating enough incomes to yield tax revenues.

The populism is structured because what is being handed out to rural farmers is not just an income support scheme or a hand-out like MNREGA (rural job support scheme). What we have instead is something that certainly looks like a vision for rural areas. An "Operation Greens" for potatoes and onions, agricultural marketing infrastructure, rural roads, separate pushes for animal husbandry and fisheries and institutional credit for farmers. By closing the loops in a rural economy, Modi is showing some method in what critics might call a politically induced madness.

The Prime Minister and his BJP were made to work every inch to retain their hold over his native state of Gujarat. By-election results from Rajasthan running parallel with the budget speech showed Congress trouncing the BJP.  To top it all, the NDA had promised to double agricultural incomes anyway by 2022.  Thus, it required no change in direction, but only a method, for the BJP to do what it has done.

Therefore, we have seen a budget of structured populism that spurns a four-year-long honeymoon with foreign investors and the urban middle class (think Davos, think World Bank's 'ease of doing business' ranking, think Moody's credit rating upgrade, think a stock market boom) for a hopefully longer-term marriage with rural areas.  Modi has to just hope that his speeches and slogans down the year will fill whatever gaps because jobs cannot be rained over a huge landmass and incomes cannot be boosted in scattered farms in such a short span of time.

But the numbers are good at least for BJP's sprightly spokespersons to throw at acronym agnostics.  How about nearly 2 crore new toilets, 321 crore person-days of jobs, 3.1 lakh kilometres of rural roads and a Rs 300,000 crore target for small-ticket Mudra loans to help micro-entrepreneurs? By clubbing all rural-related expenditure across ministries at Rs 14.34 lakh crore, the budget presents an alluring picture for those who fall for data. Only a patient analysis over a period might show how much of this is jugglery or just broad intent.

The money for this will come from optimistic revenue projections on GST and income tax collections alike and novel schemes like exchange-traded funds for debt that might do some smart financial engineering to dress up government accounts. The best part is that by the time we figure out what this budget did -- or not -- a new government will be in place. The budget thus rides into a Wild West, also known as electoral uncertainties. The PM and the FM, with lassos in hand, appear like smart cowboys.

The author is a senior journalist and editor who has worked for Reuters, Business Standard and Hindustan Times. He is currently an independent media entrepreneur, consultant, and columnist. He is listed among the top 200 Indian influencers on Twitter. He tweets as @madversity