Budget 2019 India: In my view, Budgets are unnecessarily hyped up. Newspapers want to display family pictures illustrating how much taxes were cut or prices raised. They create a human interest in a dry-as-dust document. Budgets, in fact, should be technical documents for specialists. Instead, in India it has become like the second speech after the President, laying down the government's vision.
Nirmala Sitharaman had a hard Act to follow. Arun Jaitley is a finance minister who will go down in history as one of the best. He came with a sharp lawyer's brain, a big position in the party and the government, and the prime minister's trust which meant that his budgets launched some new policy initiatives, such as Aayushman Bharat in his last budget.
This year's budget is remarkable for not giving in to shrill demands in the past few weeks about reviving the economy as consumer spending was slowing down. Tax cuts is the only thing newspapers want out of a budget. My view is that the slowdown of only 50 basis points in GDP growth rate was a temporary cyclical dip rather than a secular trend. Uncertainty in pre-election days plus the crisis in the NBFC sphere had tightened credit. Car sales were down but no surprise. The FM refused to panic and fixed her sights firmly on the long run rather than the short run. The only concession to short term pressures was not to reduce the deficit below what Jaitley had set in his 2018 Budget. But, the income tax rate on top incomes was raised making this a rare redistributive budget.
That apart, the Budget was for the long term and concerned with growth. Issues of water, energy, and environment (e-vehicles) were put in the front. Investment, raising labour productivity, rationalising the R&D infrastructure, and attracting FDI were the themes. This was a way of declaring that the BJP is now getting used to being the governing party. Even if there are state elections later in the year, the FM's focus was not short-run political but long-run developmental. Modi 2.0 is continuous with Modi 1.0.
Modi has focused on human development since the beginning. Cleanliness, toilets, electrification, solar energy, rural housing, transport infrastructure, and cooking gas have all been his concerns. He is the first Human Development Prime Minister of India. The focus of the economy has shifted from the visible headline concerns-labours and land market reform, entitlement proliferation as happened during UPA, and the India/Bharat Debate. From the outset, Modi has accepted the economic governance machinery as it is and sought to make it work better.
He is not a radical reformer but a determined implementer of programmes-his own and those which he has inherited incomplete from the preceding UPA-II. Bharat has been as central to his focus as India has been. The India/Bharat cliché is now outdated. Much has been done with rural electrification, housing, toilets and connectivity to bring rural India closer to the urban one.
This is why the themes in the Budget harked back to the themes previously discussed-Make in India, attracting FDI, making business easier, advancement of next-generation technology, and environmental concerns. There is an ambition to make India a hub for a number of new products, especially electric cars. Here is where the goal of a $5 trillion economy comes in. It is not just the present economy enlarged; it will have to be a different economy altogether. Words like Artificial Intelligence, robotics are not shunned.
The one specific policy move which will be criticised is the tax on petrol/diesel. In my view, this is distinctly progressive and crucial, if India is to meet the challenge of clean air. Some of the most polluted cities of the world are in India. Though people will complain about the hardship this move causes to middle class and its likely impact on inflation, it is right that the real social cost of individual transport should be forwarded.
Another complaint is that the deficit target has remained where it was last year. Last year the deficit was not achieved, albeit by 0.01%. The sooner the deficit is brought down the better.