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To the current government’s credit, its embrace of free-market tools for India’s economy has been nuanced, just as its “barbell" response to the covid crisis has been more pragmatic than pre-coloured. Last summer, Prime Minister Narendra Modi sought to contrast a past model of “reforms by stealth and compulsion" with his administration’s “reforms by conviction and incentives." While the clarity of purpose reflected in that contention has had a supply-side focus, reforms have not always been market-oriented, as seen in our import-tariff policy and post-covid emphasis on self- reliance. Nor has it meant a reduction in the state’s overall role, though the pandemic closed this option for at least two years. While national output is expected to recover its covid loss in 2021-22, this recovery clearly needs support for another year. So, a fiscal deficit of 6.4%, as proposed by the budget for 2022-23 unveiled by finance minister Nirmala Sithararaman on Tuesday, is easily justified. Yet, if the deal was for animated private spirits to lead India’s value generation once a spring-back is secured, then this must show in the budget proposals. Does it?

The budget’s centrepiece is its 7.5 trillion proposal for capital expenditure, which will take up nearly every fifth rupee it spends next fiscal year. Given the “flexible" approach employed by the Centre, this outlay could be used tactically as an economic prop before private funds get ploughed in. But then, that will call for speedy spending. As for reformist moves, a worthy effort aims to ease exit paths for insolvent businesses, a follow-up of earlier bankruptcy reforms. Sovereign green bonds for climate action, an e-rupee run by the Reserve Bank of India, a crypto tax that also happens to relieve holders of anxiety over a possible ban, and India Post’s transition from postal to bank services, not to forget a technology tilt in new initiatives, could also be counted among ‘reforms’ outlined in this budget. Even if they lack the ‘big bang’ aura of structural change, they could plausibly alter things in favour of our economy. The clearance of compliance cobwebs, meanwhile, has been a work-in-progress that Sitharaman indicated would carry on. Asset sales remain on the agenda, too, though with a realistic goal for a change. Even if taxation policy is left riddled with complexity, it’s a fair record. What can’t escape notice, however, are tariff tweaks. These may well be aimed at a ‘self-reliant India’ and portrayed as part of a resilience plan, but they suggest another move inward all the same.

The Centre’s ‘barbell’ covid-relief strategy was said to have combined safety nets for the hard-hit with a flexible policy response. Also, rather than direct boosters of demand, it opted for supply reforms. While some business rules were eased and markets opened, incentives linked to production and a new trade shyness traceable to a loss of export optimism have spelt an awkward dirigiste turn. It could yet yield results, but while exports have actually picked up, this policy could easily slip into old-style inefficiency protection. A supply focus has drawbacks too. Given our K-shaped recovery, scarred household finances may keep domestic demand subdued for longer than estimated, even if we suffer no shocks of the sort a jerky easy-money reversal might create globally. The benefits of growth need to fan out farther than this budget seems able to assure. While it aims squarely for post-pandemic normalcy, as it should, we mustn’t let statist impulses get the better of market forces as we move ahead.

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