The union budget presented days before the polling for Assembly elections in five states, awaited with great expectations and keen interest, turned out short on Big Bang ideas but took a rather safe and prudent approach in these uncertain times.
The spike in the stock markets immediately after the budget was presented, gave an indication that industry and investors had reposed faith in the steps enumerated in the proposals. Even the opposition parties, except for the usual noises about it being “directionless” and “vague”, appeared to have had little ammunition to attack finance minister Arun Jaitely.
These parties were keeping their ammunition dry to launch an attack on the presumption that the government would come out with sops designed to woo the voters in the five states which together constitute one-fifth of the nation’s electorate. A Public Interest Litigation was also filed in the Supreme Court against the preponing of the budget and presenting it on the eve of Assembly elections, but it was rejected.
The finance minister, however, did not give out liberal doles which could have wooed the voters. Instead he came out with some sensible measures which evoked good response. For instance marginal reliefs to low income tax payers, tax incentives to small companies and agriculture sectors besides an increase in the infrastructure sector are some of the provisions which have been welcomed by all.
None of the opposition parties could have condemned these reliefs. Nor could these parties complain about the tightening of screws on the fundings to the political parties. Now anonymous donations can be made only upto a small amount of Rs 2000. Some have questioned why leave out unaccounted donations of these amounts as this provision can also be misused.
Economic experts, however, believe that the finance minister had limited resources at his command and thus had no option but to give only limited doles. They point out that the disruption caused by demonetisation, and the fact that almost the entire amount of currency has come back to the banking system, has left little choice with the government.
Besides, these are uncertain times partly due to the continuing impact of demonetisation which has slowed down growth and the likely impact of the Goods and Services Tax coming up in the near future. The introduction of GST may provide another disruption and may hit the common people in ways not anticipated as yet.
The criticism that Jaitely is facing is that the budget has daily to include correctional measures to counter the damage caused by demonetisation. Trade and industry, which continue to suffer due to demonetisation, needed some boost. Also he has failed to capitalise on the opportunities created by demonetisation. Certain incentives could have been incorporated to push the economy towards digitalisation. On the other hand he could have announced reduction in service charges for purchases through plastic money although he did announce waiving of surcharge on railway tickets purchased online.
The sharpest criticism that the budget has received is that it has not charted out a roadmap for reviving investment and growth. This was particularly required in view of the projected slowing down of the economy. It has given a push for rural development through increased outlays for schemes like MGNREGA and the Pradhan Mantri Gram Sadak Yojna but has avoided reforms in the agricultural sector. For instance taking further on its less cash economy as one of the aims of digitalisation, it could have introduced reforms like direct transfer of benefits to farmers in place of subsidies. This would have eliminated the scope of leakage of benefits.
It was also expected that the damage caused by the slowdown in output and the consequent growth in employment due to demonetisation would be partly undone. One of the steps could have been raising significantly its expenditure relative to the GDP to simulate growth. It could have brought in some reforms in social and welfare sector but apparently its hand was held back by the ensuing elections in five states.
There were reports anticipating that the government would announce a basic minimum income for all, which was also indicated in the Economic Survey, but the government chose not to bring it in. Although Jaitely has announced a simplified one page Income Tax return form for those at the low brackets, what is acutely needed is simplification of the complicated tax laws and red-tapism which had been leading to corruption and delays.
The budget certainly lacked big ideas and it was one of the last chance for the current term of the government to bring those in as it would get into the election mode in not too distant a future to prepare for the 2019 general elections.
However as the cliché goes, there may be method in this madness, not giving any doles in the midst of this election. To a cynical electorate that see midterm budget sops as bribes for elections, Jaitley may have won many voters over by showing that his Government is serious about the economy and does not engage in corruption to win elections!