New Delhi: How does one rate Budget 2020, the second season of the Nirmala Sitharaman show in just seven months?

In the past, every budget was judged both for its form, influenced solely by the FM, and its substance. However, over the past few decades, commensurate with the rise of the private sector, the budget has ceased to be the only force multiplier, diminishing the substance the annual exercise can offer.

Yet, it did not prevent the build-up of hype, especially with Prime Minister Narendra Modi publicly investing his social capital in the effort. In short, Sitharaman was expected to, like a magician, conjure a rabbit out of the hat as it were. Measured against these rather unfair expectations, the budget, at least going by the initial response of the stock markets, seems to have disappointed. Indeed, while this may be a justified first impression, it would be a mistake to dismiss it thus. Here are four reasons why:

To begin with the first budget of this decade was an honest effort from Sitharaman in extremely inclement economic circumstances. She had the unenviable task of stretching the cloth to accommodate interests all around—in this case, as she pointed out in the post-budget interview to Mint, it included both Bharat and India. She could have, like previous incumbents, buried the bad news and window dressed the fiscal numbers.

Instead, the FM chose to come clean. She has now made it the norm to disclose off balance sheet debt—a bone of contention with analysts and rating agencies; and projected a fiscal slippage in 2020-21.

Second, the budget makes a very formal play for market forces. To its credit, the Bharatiya Janata Party, which leads the coalition government, is probably the most pro-business political regime ever; to avoid being dubbed a “suit-boot Sarkar", they have tagged pro-poor to their pro-business credentials. This is most evident in the fiscal choices by Sitharaman. She has not used the fiscal space to undertake more directed spending; instead, the money has been deployed in tax giveaways. The income tax sops transfer money to individuals who, in turn, can spend it on their discretion. The freedom to choose is a fundamental of market economics.

Third, flowing from the above, with this budget, the NDA has reiterated that the public sector is no longer sacred to the national economic mantra. Just days after Air India was again put on the block, the FM has more than tripled the disinvestment target to 2.1 trillion; and included even Life Insurance Corporation of India, the most iconic symbol of security for the common man. Reformwallahs will presumably take succour from this ideological commitment to privatization.

Fourth, this Union budget has signalled that the government has reached the limits of its fiscal abilities. Accordingly in future, states will have to be fiscal stakeholders in development projects being undertaken jointly. How fiscally strapped states will generate the resources is another matter, though. This is exactly why states and the Union government—if they share the vision of “India First"—will have to walk the talk on cooperative federalism.

Finally, where this budget falls short is not simply that projections of some of the budget targets are up in the air. Instead, it has missed the opportunity to genuinely seek to streamline direct taxes. A flawed model, with myriad slabs and rates, has all but buried the singular tax reform: goods and services tax.

A similar slip-up seems to have afflicted the rejig of income tax rates undertaken in the budget. While the move to a low tax rate regime shorn of deductions is most welcome, the budget lost the script by actually creating more tax slabs—classic overkill by zealous bureaucrats, who like Cold War warriors, believe everyone should be distrusted. A similar overreach has brought NRIs into the tax net, opening a potential political front against the government.

In the final analysis, it is clear that the budget is long in vision. The attempt to be all- encompassing may have buried them, though. Worryingly though, the budget risks being overwhelmed by avoidable self-goals. As the old adage goes, for the want of a nail, the kingdom was lost.

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