Union finance minister Arun Jaitley should not have sounded defensive whilst reiterating that he would present a reformist Budget and not budge from that despite his party being thrashed in the Delhi elections. Perhaps he felt he needed to emphasise this to counter media speculation that he would have to present a populist Budget to keep up with the Joneses, in this case with chief minister-designate Arvind Kejriwal.
His focus, as he says, will be on presenting policies that will encourage investment, generate employment and empower the poor. Surely no one has any quarrel with this, but it depends on how he is able to package them and how he structures his tax reforms. The government of Prime Minister Modi has already undertaken several reforms outside the Budget. Mr Jaitley’s main task now will be to allocate funds to enable the economy to go in the direction that
Mr Modi has already indicated. It is here that he will have to be even-handed with the better sections contributing more to the cause of development than those who are marginalised for no fault of their own. High on Mr Jaitley’s agenda would be the rationalisation of subsidies to keep the fiscal deficit within limits. This is a tricky area because hitherto the funds allocated to helping the unempowered in crucial areas like health, education, the PDS and social welfare would be cut first. In the case of big business, successive governments have forgone or given concessions totalling Rs 5 lakh crore in Budgets.
If Mr Jaitley continues to subsidise the rich under the label of “incentives” to do business, it would indeed be controversial. His government and Prime Minister Modi have repeatedly reiterated their commitment to creating a business-friendly environment. If he really delivers on this then there would be no need to subsidise the corporate sector and others with Rs 5 lakh crore, nearly five times the fuel subsidy. Easing conditions for doing business entails giving permissions for electricity and water within a day, or a little more, cutting down procedures for starting a business, and, most of all, curbing corruption.
Eradicating corruption and cutting down the time required to start a new business would lower costs considerably (It is estimated that bribes alone account for over 20 per cent of costs). This is what both foreign and domestic investors are waiting for. Mr Jaitley’s problems lie more outside the Budget, namely in getting the ordinances passed in Parliament, particularly those on raising the cap on FDI in insurance and land reforms. The latter is going to be even harder following the AAP’s victory in the Delhi Assembly election.
