Finance minister Arun Jaitley’s fourth successive Budget, presented on Wednesday, was a bland one, like his three previous presentations. The tone reflects both the man’s temperament — uncomfortable with rhetoric — and the situation post-demonetisation. It does not hold out any sanguine hopes for rapid growth in the economy. All it promises is an undefined transformation, a vague kind of energisation and a cleaning-up process that sounds platitudinous and appears monotonous.
The modest tone and tenor of the Budget should not be held against the finance minister or the BJP-led NDA government. It is interesting that Prime Minister Narendra Modi chose to give a detailed explanation of Mr Jaitley’s Budget, and his tone too remained subdued. It can be inferred that the government cannot beat the drum because of the Election Commission-enforced code of conduct that is in force because of the Assembly elections due in Punjab, Uttarakhand, Goa, Manipur and Uttar Pradesh, starting February 4. It can be expected that the government’s and the BJP’s advertisement blitzkrieg would be unleashed after the results of the Assembly polls in the five states are announced on March 11. But by then, attention would have shifted away from the Budget.
This may not turn out to be such a disadvantage for the Prime Minister, the finance minister, the government, the defenders and the apologists because Budget 2017 is much too staid to raise any sparks at any time, either now or much later. It can be argued that it is indeed a sign of maturity that the Union Budget remains a matter-of-fact affair and it does not create too much noise. But it is a forced virtue in more ways than one.
First, there is really nothing exciting about the Indian economy right now. There is neither a crisis nor a high. The government could use the lull to sort out administrative issues, and it seems that is what is intended. As the Goods and Services Tax (GST) is all set out to be rolled out later this year, the finance minister did not announce any indirect tax measures. On the direct tax front, the reduction in the rate in the lower slab to five per cent from Rs 2.5 lakhs to Rs 5 lakhs is clearly a palliative in the aftermath of demonetisation. The finance minister confessed as much in the Budget speech: “...post-demonetisation, there is a legitimate expectation of this class of people (honest taxpayers) to reduce their burden of taxation.”
Government expenditure by way of welfare measures by raising the allocation for Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) from Rs 38,000 crores to Rs 48,000 crores, and in public investment through schemes like building roads and houses in rural areas through the Pradhan Mantri Gram Sadak Yojana (PMGSY) and the Pradhan Mantri Awas Yojna (PMGAY), does carry a financial burden. The argument of the finance minister appears to be that the government can afford the expenditure while adhering to the Fiscal Responsibility and Budget Management (FRBM) Act’s provisions for keeping the revenue and fiscal deficit under three per cent. The recently constituted chief ministers’ committee on FRBM which submitted its report has mooted the idea of “sustainable debt” though there is no increase in tax revenue which was 17 per cent in 2015-16 and it is expected to remain there in 2016-17 as well.
But the sore thumb in the government’s thinking and policy measures remains that tax collections are not commensurate with economic activity in the country. It has been argued that demonetisation will bring more people into the tax net. But the finance minister knows too well and he has rolled out figures about how people who file tax returns show losses or minimum profits. While bemoaning the fact that “we are largely a tax non-compliant society”, he does not seem to have any idea as to how to change this culture of tax evasion. So demonetisation, or the bid to push more people into the digital transactions sphere, seem to be tame measures to fight this tendency. The claim that demonetisation marks a tectonic shift seems to be so much hot air.
What is to be wondered is that despite the huge amounts of money generated through productivity and consumption activity remaining below the tax radar, and assuming that the money that remains invisible because of tax evasion is not taken into account while measuring the state of the economy, it seems that the macroeconomic indicators are fairly good. This remains the basic paradox of the Indian economy.
The BJP, like the Congress and like any other political party, shows no inclination to minimise state interventions in the economy. Therefore, what remains to be expected from this government or any other, this finance minister or another, is how efficiently they allocate the money they have for public goods. This Jaitley Budget shows no great imagination, and displays no innovation with regard to public spending. It soldiers on along the well-trodden path. And that is not the fault of Mr Jaitley or anyone else. The economic challenges that face a polity are gargantuan and intangible. The economy, it seems, is an untameable beast. What any government can do is very limited. It is unrealistic on the part of the people to expect finance ministers to produce wonder documents through the annual Budget statements. There is a need for radical rethink about the nature of the economy. It is not the job of politicians or bureaucrats to contribute anything meaningful to this. They are plainly not equipped to do so, either intellectually or otherwise.
The author is a Delhi-based commentator and analyst...