Arun Jaitley's boring budget is good news

Of the three Budgets presented by Arun Jaitely since 2014, Budget 2017 is by some distance the most cogent. There are no grandiose new schemes, no policy pyrotechnics, no negative surprises for the industry, and certainly no substantial return gifts for citizens for enduring the minor inconveniences of demonetisation. In cricketing terms, this is akin to a batsman compiling a stolidly efficient half century between the lunch and tea sessions.

In its unremarkableness (even the customary Hindi couplets were colourless), barring the crackdown on dodgy political donations, lies Budget 2017’s virtue. The finance minister even overcame this government’s penchant for policymaking by acronyms. There was the token presence of TEC – transform, energise, clean India – in the corny acronym department. A dose of sobriety was inevitable after the disruptive demonetisation.

The current economic situation is such that growth cannot be achieved by massive private sector investments. The global economic environment dictates much of those, and only a small share of the blame can be apportioned to this government for the decline in capital formation. It is only the government that can spend big and maintain the pace of economic activity. This Budget signals that intent. Besides signalling policy intent, the finance minister through the Budget had to, and has tried to, manage expectations of investors worldwide and the country’s citizens.

Managing expectations

The budget also proposes a much expanded agriculture credit (Rs 10 lakh crore), and investments in railways and roads, rural housing and Mahatma Gandhi National Rural Employment Guarantee Act schemes that are high but not eye-poppingly gargantuan, to be termed populist. In walking the responsible middle path, Jaitely seems to have done well in managing expectations at home and abroad.

The increased spending will take the fiscal deficit to 3.2% of Gross Domestic Product instead of the targeted 3%. Foreign credit rating agencies and analysts will predictably frown at that. But in the absence of large private investments, that disapproval is a small price to pay.

The salve for those singed by demonetisation too was targeted and specific. Small and medium industries, possibly the worst affected by notebandi ,received a 5% cut in tax rates to 25%. All that the salaried class got was a minor sop. Those with taxable income between Rs 2.5 lakh to Rs 5 lakh will be taxed at 5% instead of 10%. Scroll’s more well-heeled readers might end up saving a maximum of Rs 12,000 in taxes in the entire year. There was a little bit of Robinhoodery thrown in. The super-rich (with income above Rs 50 lakh) will have to fork out an additional 10% cess. Perhaps it was the government’s way of countering the charge that it was unusually cozy with the affluent. The real estate sector which virtually sank post demonetisation is the recipient of many sops.

Jaitley’s 2017 Budget has many similarities to Jaswant Singh’s unfussy 2003 effort whose theme, in his words, was garib ke pet mein daana, grihini ki tukiaa mein anna (food in the belly of the poor, and money in the purse of the housewife).

Ease of doing business

In terms of themes, besides continuing on the path of fiscal consolidation, the Budget tries to strengthen tax administration and enhance the perception that India is an easier place to do business in. The abolition of the foreign investment promotion board that once vetted foreign direct investment applications, the clampdown on cash transactions (no transaction in hard money over Rs 3 lakh), cutting political donation limit to a tenth, and raising the ceiling for compulsory audit for professionals to Rs 2 crore from Rs 1 crore are steps in that direction.

Asking state governments to dismantle the Agriculture Produce Marketing Committees – an institutionalised cartel of middlemen in agriculture – for perishables like vegetables is another significant reform measure, if pursued. If these committees are folded away, businesses and cold chains can engage with farmers directly, helping them discover the best price for their produce and lower consumer prices.

The devil lies in the details, is an enduring Budget Day saying. Thankfully this Budget is devoid of policy perversions. Its simplicity means there are no hidden taxation tweaks or duty jugglery that keep chartered accountants happy. The stock market rally on Budget Day was an instant indicator of the relief felt by the industry on that count.

Those like Rahul Gandhi condemning the Budget for not doing enough to spur jobs creation are barking up the wrong tree. The Modi government’s target of creating 100 million jobs by 2020 may well turn out to be just another jumla, but job creation is not something that one Budget speech can accomplish. Making life easier for small and medium enterprises that generate most new jobs, rather than offering tax sops for large companies, is a step in the right direction.

A boring Budget, or in cricketing terms,the steady and serene accumulation of risk-free runs in the middle overs, is good news. The ungainly slogs, reverse sweeps and helicopter shots will surely arrive closer to 2019.