The eagerly awaited first full Modi Government budget was presented by the Finance Minister Arun Jaitley to the Indian Parliament last Saturday. It is indeed not as per the expectations of certain circles. At the same time, surely, it appears to be a sensible budget and the priorities are more proper and timely. The Finance Minister must be credited for shunning the roots of populism or focusing on vote bank politics. In India, of all places, the main emphasis for the national economy is proper and correct emphasis on wealth creation and, at the same time, to be concerned about those who are in the lowest strata of society.
Budget and budgeting is a part of our everyday life. Even the smallest projects or enterprises need to have a detailed strategy with clear destinations and the best route to follow. A budget is a blueprint. Whether it will achieve the bottom line in black or deep red depends on many factors. The BJP-led NDA Government has a clear majority in the Lok Sabha (the Lower House of Parliament). The Upper House has overwhelming strength of the opposition. On Tuesday 3rd March, as could have been seen on TV, the opposition does not only oppose on principles or issues but has no qualms to throw fair or unfair obstacles in the path of the government. This should be taken in stride. India has, after all, opted to develop through democracy.
The provisions of this budget are clear, more welcome and some of them are as under:
* the focus to boost investor sentiment
* a four year road map to lower basic corporate tax to 25% from the present rate of 30%. It appears to be the correct international competitive rate
* differing the implementation of the General Anti-Avoidance Rules by two years
* commitment to a national goods and service tax system from April 2016
* enactment of a comprehensive bankruptcy code which would inevitably enable speedy reorganisation of failed businesses
* plans to de-risk private investment in infrastructure through auctioning mega projects in ‘plug-and-play’
* allowing salaried persons the choice between making mandatory contributions to the Employees Provident Fund and potentially higher return-generating New Pension System
* establishment of a separate holding investing company for public sector banks and corporatisation of state owned pots
There are some issues which are inevitably more like short comings of the budget. They are:
* extending timeline for meeting the 3% of the GDP Fiscal Deficit target. This could be understood given the private sectors continued reluctance to invest
* the continuation of the subsidies on food and fertiliser which are in a way unavoidable
* targeting welfare schemes to the truly needy using the Jan Dhan-Aadhaar-mobile (JAM) platform. Though there is no attempt at rationalisation
Finance Minister Jaitley had to juggle many dreams. He also had to remember the promises made by Prime Minister Narendra Modi during the election campaign as well as later on in Parliament. It is right and proper that the old slogan of ‘garibi hatao’ has been replaced convincingly by emphasis on wealth and job creation. India needs at least 12 million new jobs a year for the eager youth coming to the market.
Another important part of the budget is the Center/State relationship and the allocation of higher percentage of the national resources into the States. Now the Central Government will retain 38% and the States will receive 62%.
Another very admirable approach is more equitable distribution even where the BJP is not in the government as for example, West Bengal, Orissa, and other States. Of course some would argue that it may be a long term strategy of the Modi government to push for BJP in such states of India. Even if it is true there is nothing ignoble about it.
There is another area of concern about smart city concept. Last year the budget gave much importance to this topic. In this budget there is no mention of it - perhaps it is better to grow from the bottom up than the other way round.
Of course some commentators would have their own views about the proposed big goals such as 100,000 kms of new roads, 60 million new houses as well as medical and educational facilities in rural areas. The concern is right if it raises issues such as who will do it, how it will be done, in what time frame the first steps will be taken etc.
Overall, surely this budget is a positive one for sustainable growth over a longer period of time but the most important question is how it will be implemented. Fulfilling the promises on land reforms for industrial development has several challenges. This is not China. An ordinance can not acquire the land for industrial or infrastructure projects but equally it will be good to proceed with the consent of the stakeholders and it will benefit the environment and ecology. - CB
