The budget shares out the fruits of higher growth and cutting waste: expenditure rises without higher tax mobilisation. The reform vision of growth, inclusion and governance is broader and deeper than just passing the many pending bills. There is a beginning in the use of technology to deliver subsidies and tax reforms, reducing waste and, thus, shifting social spending towards education, health and insurance that creates capacity. Transaction costs are to be lowered by shifting towards self-regulation in manufacturing and self- assessment in customs. An intelligent use of incentives pushes the system towards greater efficiency.
The counter-cyclical fiscal stance made possible creates room to respond to the next downturn. For the first time, there is a reporting of the capital expenditure component in the revenue deficit. Central government transfers to states are used for capex that increases incomes and future taxes, so the unmodified revenue deficit is actually an overstatement.
A better record in reaching expenditure and deficit targets suggest improvement in implementation, but there is still a long way to go. The major failing is in forgoing the potential contribution of many excellent supply-side initiatives towards anchoring inflationary expectations.
Ashima Goyal
Professor, Indira Gandhi Institute of Development Research
