This was not to be yet another Budget speech. It came in the wake of a regime change where the electorate signalled its unhappiness with the manner in which the country was being led and the deep morass the majority of people found themselves stranded in. Narendra Modi’s promise of “achche din aane wale hain” was not just about our immediate well-being, but also the promise of a new vision. The people of India, particularly the youth and, more specifically, the first-time voter, reacted enthusiastically to this promise and responded by brutally casting out the Congress regime and its way of doing things.
India’s predicament stated in a few sentences is this: We need to be creating 12 million jobs each year for the new entrants to the workforce. We haven’t been doing so for quite some time now. The growth during the UPA’s regime was mostly a jobless growth. Regional disparities were growing, so were income inequalities. The fact that while agriculture’s contribution to the gross domestic product is a mere one-sixth, and yet almost 60 per cent of the population is still dependent on it very simply tells us that the majority gets less and less. The Modi promise was that all this would be attended to.
The Bharatiya Janata Party’s election manifesto unrolled a very clearly articulated vision. Infrastructure was to drive our breakout growth. A hundred new cities, a brand new high-speed railway network, the interlinking of rivers, non-stop power supply to every home in India and a home for every Indian family before 2020 were some of its more exciting promises.
Instead of a new roadmap towards this vision, we got another business as usual Budget. As Budgets go, it is a competent and even a good Budget; it does its job quite well. It doesn’t promise much and doesn’t rock the boat. On the other hand, we have a few lollies to keep our mouths sweet and immediate appetites whetted. The deductions for house loan interest and investments have been increased. A taxpayer could benefit by as much as Rs 7,000- Rs 8,000 a year on this. The income-tax limits for ordinary taxpayers and senior citizens have been raised by Rs 50,000. A taxpayer could benefit by up to Rs 15,000 per annum. This is good news indeed. Households all over will heave a sigh of relief that the subsidy on LPG will continue to be over Rs 450 per cylinder. We all benefit by this and should indeed be happy.
There are some provisions for the farm sector that should also appeal. National Bank for Agriculture and Rural Development (Nabard) will now be required to extend credit to half a million landless farmers, hitherto unable to get credit due to lack of any land as collateral. Agricultural credit exposure is to be expanded to Rs 8 lakh crore and a 4 per cent rebate on the timely repayment of farm loans attracting an already concessional 7 per cent will be welcome and incentivise repayment. The Budget also provides a fund of Rs 5,000 crore for building new farm logistics such as cold storages and grain silos.
There are other good ideas as well. New power projects will get a 10-year tax holiday. There will be no recourse to retrospective taxation — something that will make the foreign institutional investor lobby very happy. There are increases in foreign direct investment limits in critical sectors like infrastructure, housing, insurance and defence. More FDI will be brought in through the automatic route. The Mahatma Gandhi National Rural Employment Guarantee Act is to be linked to specific projects and purposes. Over Rs 52,000 crore is to be invested in roads and highways, including Rs 14,389 crore for rural roads. There is also a special venture capital fund of Rs 10,000 crore. These are all welcome.
To pay for all this, in addition to all that is already in the pipeline, the government hopes to increase revenue by 19.2 per cent, while the GDP growth is expected to be between 5.4-5.9 per cent. What does this suggest? Will we have a higher inflation? Or is tax collection going to get better by that much? One clear indication is the finance minister’s announcement of a settlement commission to realise a good part of the Rs 8.1 lakh crore now stuck in litigation and disputes. But there is no comment on how the government plans to recover the Rs 4.64 crore of state-owned banks stuck as non-performing assets. One can only wish them well.
This Budget comes against the backdrop of two looming crises. The entire rain-fed region in India, over 60 per cent of the cropped area, is now stricken by inadequate rainfall or drought. We will need to provide for this. But finance minister Arun Jaitley clearly hopes on the weather god coming good. The war in Iraq threatens to jack up oil prices. The oil trade deficit is already about $110 billion. If prices go up, the burgeoning domestic demand will further stress the current account deficit.
Maybe Mr Jaitley is hoping on diplomacy and good sense to prevail in West Asia.
The problem with this Budget is that it could be P. Chidambaram’s Budget. Only, Mr Chidambaram would have written a shorter speech and been more eloquent. Interestingly enough, Mr Chidambaram’s interim budget for 2014-15 indicated total revenue of Rs 17.63 lakh crore, while Mr Jaitley’s Budget hopes for revenue of Rs 17.94 lakh crore. It would seem that for just another Rs 31,000 crore, Mr Jaitley went on and on for 2 hours and 10 minutes. In the Parliament, Ashok Gajapathi Raju was yawning and Piyush Goyal was catnapping.
Given this modest Budget, I have little doubt that Mr Jaitley will competently manage it.
It is modest. It is some more of the same. But that is not what the promise of Modi sarkar was. Far from the achche din Mr Modi kept promising during his campaign, it seems like we are in for wahi raat, wahi din!
The writer held senior positions in government and industry, and is a policy analyst studying economic and security issues.
He also specialises in the Chinese economy.