Finance Minister Arun Jaitley’s fourth budget is a solid, stolid and entirely consistent effort. It may not be perfect and meet every parameter of every analyst – no budget ever can – but is remarkable in its unwillingness to resort to gimmickry and political populism even as the polity enters a near non-stop election season.
This follows a pattern. The fiscal deficit target has been a Lakshman Rekha for the Narendra Modi government from its first year itself, when Jaitley ambitiously adopted the number left to him in the vote-on-account presented by the outgoing UPA government. Now, after three years of fiscal consolidation, the NDA government has just that much more room to spend. Even here, Jaitley has been judicious.
He has refrained from going overboard, promised a fiscal deficit of 3.2 per cent of GDP this year and 3 per cent in the following year, but given concessions and bigger outlays to infrastructure and housing in the hope of promoting private investment. Politically, he has also given himself the space to spend intelligently in his final year – when the slow jog to the general election will commence.
Jaitley was right in offering a budget with continuity and few shocks. He has assessed that the economy is in for a major disruption this year when the Goods and Services Tax is implemented, and is just coming out of a period of pain following demonetisation. The budget needed to be a balm, especially because, as the Finance minister pointed out, “In several parts of the world, there are signs of increasing retreat from globalisation of goods, services and people, as pressures for protectionism are building up. These developments have the potential to affect exports from a number of emerging markets, including India.”
The impact of Donald Trump’s economic policies is a concern. These have the potential to trigger a United States trade war with China and a global slowdown. India will not be unaffected which means the room for adventurism and risk-taking was just not there for the Indian Finance Minister. It also suggests why the Economic Survey, while such a remarkable document this year, remains an aspiration, as it tends to each year, irrespective of the government in question. Political realities and now global conditions make it difficult to embrace bold and daring ideas.
Both Modi and Jaitley have a habit of sticking to points and promises made and sometimes even obsessing over them. When demonetisation was announced, the two men had spoken of it being the first of a series of steps against black money and corruption, as well as a trigger to promote digital payments. Inattentive critics had scoffed at such reasoning and ascribed it to an afterthought following the cash shortage in the early weeks after November 8.
Today, not only is the bulk of that cash shortage behind us, both the endeavours – fighting corruption and promoting digital payments – are being pursued. The honest citizen and tax-payer is being rewarded or at least being told that she is not a fool for being honest and those who act dishonestly will be put to inconvenience.
Tax incentives for Point of Sales (POS) machines, announced a month after demonetisation, have been broadened and institutionalised. Payments to the government, by way of taxes for instance, will mandatorily follow the digital route beyond a certain (and to-be-announced limit). Cash transactions above 3 lakhs have been plain abolished. One suspects that ceiling will be lowered still further in the years to come. Mr Modi’s “war on cash” is a serious one.