With its sizeable allocations for farming, healthcare—including medical insurance, education, medium/small manufacturers/ businesses, and infrastructure—this final whole year Budget, is designed to bring “New India” to the masses. It is a New India, the contours of which are nationalist, honest, and progressive, much to the discomfort of the deal-making old order. One out-manoeuvred by real actions taken for the disadvantaged, rather than routine lip-service, elitism, dynastic privilege, the role of black money and attendant corruption. This budget also comes in the context of multiple initiatives taken over the last 36 months and more. It is the first budget post-implementation of an imperfect one-nation-one-indirect tax GST, some 20 years in the making, even though it is still undergoing regular refinements. It also clearly means to address large military outlays, as necessary, and off-budget.
More than a year after an overnight shock 86% demonetisation, and months after GST was trundled out, cash transactions have made a limited comeback, but the number of direct/indirect taxpayers has risen sharply. This is in addition to the advent of digitisation and its benefits spurred on by multiple apps, and the linking of Aadhaar to most things, including bank accounts, cell phones, insurance, investments, property purchases. Other tough measures such as the new improved benami law and RERA are starting to both net the big fish, and improve the discipline in the real estate universe.
Companies have begun to borrow afresh, there is a 10% uptick, the NPA menace has been halted, and recoveries under the Bankruptcy Act are underway. It is very difficult for fat-cat defaulters to either run or hide, and many are under threat of losing their lucrative other assets. This, even as the banks are being substantially recapitalised. Holy cows such as Air India are en-route to being sold off and the government is up on its disinvestment targets.
Finance Minister Arun Jaitley has been letting the fiscal deficit slip a little, targets notwithstanding, in order to accommodate it all, possibly on the calculation that accelerated GDP growth will compensate. And while there is a threat of renewed inflation from elevated farm prices, high oil, and the big spends, it could well not go that way at all. Oil prices may have peaked, elimination of layers of middlemen may mean that food prices will not go up, and the big government spend may stimulate employment and growth, rather than runaway prices.
All of it, of course, could be viewed as a massive stimulus to the economy, via a wide array of enabling incentives.
It is, therefore, not surprising that there is a degree of carping from those very quarters that have long professed concern for the poor farmer, unemployed youth, and so on. However, these armchair warriors should take comfort in the strong push given to infrastructure, designed to eventually put money in their pockets. It is a garland called Bharatmala, amongst others, including an unprecedented gush of FDI at over $60 billion, and foreign exchange reserves approaching the $500 billion mark.
How much more foreign money can we expect after labour law reforms expected post August 2018, when the BJP/NDA will have a majority in the Rajya Sabha?
In the meantime, yes, there are creeping though not onerous taxes on the middle classes and above, such as the modest capital gains on equity tax, necessary to pay the piper for social uplift. However, the FIIs are reportedly off to France and the Netherlands to route their monies, because they still enjoy the exemptions plugged in Singapore and Mauritius.
Oxfam’s recent and racy report did say 73% of the wealth has been cornered by 1% of the Indian population, even if this accounts for 12.5 million people. And India does have the sixth largest collection of billionaires in the world now.
That the wages of a disgracefully irresponsible set of parliamentarians, particularly in the Opposition, has been put on automatic track for raises, is regrettable. Raises for the President, Vice President and Governors were, however, long overdue, particularly when a quasi-state like Delhi gave itself disproportionate pay hikes.
A positive perspective on this budget is only possible if one pays no heed to doubting Thomases. They have readily cast all the initiatives for the poor and smaller businessman, particularly the talk of creating millions of new jobs, and even “Modicare”, as a neat set of fresh “jumlas”. The insurance that seeks to cover secondary and tertiary medical care for 500 million people at first, is also going to boost the prospects of the sector. Indeed, many of Modi’s initiatives, and his stamp is very evident on this budget, seeks to organise several bites of the cherry.
Similarly, SEBI announcing that a large listed company might soon be required to raise 25% of its financing needs from the bond market is also a simultaneous move to widen and deepen the debt market.
Something we have not seen in a while but in keeping with global trends is an increase in customs duties on most imported goods and inputs, including luxury cars. Not sure what this is aimed at, unless it seeks leverage in international commercial negotiations or is a tit-for-tat action.
Between the myriad woods and trees of the detail, this budget has Socialist overtones, but without its ideological emphasis on “redistribution” of resources. But it does squarely address the bottom of the pyramid, where a third of our heaving millions live.
While we are indeed already the fastest growing major economy, shortly to become the fifth largest in the world and aiming at $5 trillion by 2025, to become the third biggest, we must carry most of our people on this joy-ride too.
Congress president Rahul Gandhi, seen sporting a $1,000 Burberry jacket recently, may have inadvertently kicked it all off with his “Suit Boot Ki Sarkar” jibe quite early in the day of this present government.
If this budget seems to have gone lightly over the rest of the population, including the middle-classes and the rich, it does so without apology or defensiveness. Perhaps, Modi seems to say, you cannot fault me for addressing the needs of those who need it most, and my development agenda does benefit the masses as much as the classes. Truth be told, direct tax benefits were given to 80% of the taxpayers via last year’s budget.
That this budget has come 11 months or so before the 2019 general elections, and not in 2014, in this government’s can-do-no-wrong first flush, is indeed a pity. Though, it probably suggests that it is an economic manifesto for the next term of five years.
Given the emotive appeal of a positive Ram Mandir verdict expected shortly, and a strict military attitude towards China and Pakistan beginning to pay off diplomatically too, in the context of Afghanistan and North Korea, Modi may have much more than a pro-poor budget to bank on.
In 2014, for the record, ours was a bruised and battered economy inherited from the UPA that may not have been able to sustain this present ambition.
This government, in the face of mounting criticism for promises unfulfilled, is resolutely looking forward. It seems to say five years is not long enough to complete the agenda. Indeed, the Finance Minister unabashedly lets his plans, including the much touted doubling of farm-income, and affordable housing for all, spill over to 2022, independent India’s 75th year.
But despite the confidence in the future, and the formidable electoral track record, the 2018 Budget presentation came on a day when the Congress swept three byelections, two from significant places in Rajasthan, such as Alwar and Ajmer. This has followed on from losses to the BJP in civic polls in Madhya Pradesh, and a fright in the Assembly polls in Gujarat. Allies such as TDP and the Shiv Sena are also breaking away.
So, this budget, that puts the BJP back in the driver’s seat, has not come a moment too soon. It is likely, in August 2018 and after, that the second act before the important state and general elections will play out. This could address, via fresh legislation, a taming of the judiciary, the anomaly of Article 370, Muslim affairs, simultaneous elections, the aspirations of big business, the nationalist middle class, any other neglected support field. It could well lay waste to the Opposition in the process.