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Budget against a tough backdrop

Budget against a tough backdrop

How does one judge an annual budget? Should we judge it against the challenging context in which it is presented? Does one judge it by the reaction of Dalal Street? The Sensex, for the record, moved 122 points from its last closing! Does one judge it from reactions of the ‘aam aadmi’? Or does one judge it from an industry and sector point, recognizing that satisfying all sectors is impossible. Or should one judge it from the confidence among foreign investors? Or does one judge it from a pure numbers perspective, which is about deficit, etc.?

From reducing the deficit, the numbers look good and impressive, and we should expect that in an economy that is growing close to double digits in real terms. I’d expect the overall shape of these macro data to look more positive in the next decade.

The finance minister’s budget is against the backdrop of rising prices and rising aspirations. Here is a country which holds promise of a 9% per annum gross domestic product (GDP) growth over the next decade. At that rate, we will be anything between a $4-5 trillion economy.

So, at a fundamental level, an annual plan cannot keep that going. We should not look for it in a budget. It requires a structural plan that addresses the fundamentals of growth and also addresses the social challenges that growth can bring. The benefit of growth lies in creating jobs for the aspiring youth. For that, the business community should have confidence in the broad policies. The finance minister has tried to keep changes to the everyday running of a business to a bare minimum.

The FM has done a terrific job of looking at the challenges of growth, i.e., a mismatched skill set that could hurt employability, a mismatched farm growth profile and a mismatched tax collection mechanism for a $4-5 trillion economy. The extra attention and allocation for education and skill development is a great move for the next decade and subsequent budgets must build on it. The FM’s efforts to do something about pulses and also the agricultural value chain are significant. The focus on extra loans to farmers and also on all villages with a population of more than 2,000 people are good since a lot of the rural value is generated from these hamlets. The extra expenditure on health is also commendable. The expenditure on health and education as a proportion of GDP is low in India, and raising it has to start with the government’s commitment to these two sectors.

Two commitments stand out—goods and services tax (GST) and disinvestment. The disinvestment target of Rs40,000 crore is an achievable target. The commitment to making GST happen is possibly a bold signal since we haven’t implemented it for the last two years. GST has the potential to bring $1 trillion extra in collections over the next decade, and seeing that through will be the biggest tax collection challenge for the finance minister this fiscal year.

Could the FM have done more? Yes! That’s stating the obvious and asking each of us whether we could do more in our jobs!

It would have been good, for instance, if technology had got an impetus in this budget, especially broadband.

Not everyone will endorse this budget and they will point to rising prices and inflation. That is something the finance minister needs to address more concretely in the coming months in conjunction with other ministries. Prices are not something he can battle alone, and he cannot do so without considering the global push and pull on pricing oil, commodities and food.

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