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Here is the full text of the reaction of former finance minister P Chidambaram to the Union Budget as proposed by FM Arun Jaitley:
After listening to the budget speech or after reading the text, what is the one big takeaway for the average citizen? It is that there is no Big idea.
This is the third budget of the NDA government. The first two were forgettable. The Prime Minister had promised that he would “reform to transform”. The word ‘reform’ is a little understood but much used word. Reform means reform of factor markets or product markets. There is little evidence of such reform in the budget.
So, the NDA has followed its own brand of budget making, which is just housekeeping and accounting.
Thanks to the crash in oil prices, that required hardly any effort. The government boasts that it earned more tax revenues than it had budgeted at the beginning of the year. Did they collect more corporation tax? No. Did they collect more income tax? No. What they collected more was excise duties. It is a whopping increase of Rs 54,334 crore! That amount was due to the numerous times the government increased excise duties on petrol and diesel after the budget was presented last year.
I had predicted that the government will comfortably achieve the target of fiscal deficit in the current year. It has, and I am happy. I am also happy that the government has spurned the advice of the Chief Economic Adviser and stuck to its own fiscal consolidation path for 2016-17. I take it as a vindication of the UPA government’s policy declared after adopting the Vijay Kelkar committee’s report on fiscal consolidation.
In the last two years, the government had turned its back on rural India, the agriculture sector, and the social sector programmes. I would like to test commitment of the government as they appear from the budget and revised estimates for 2015-16:
I may, however, note that the expenditure budgets have been achieved or exceeded under heads such as water supply and sanitation; welfare of SC, SCS, OBC and minorities (marginally); and relief on account of natural calamities.
Three areas were crying for attention: the rural economy, private investments, and exports. How has the government addressed the problems in these three areas.
On agriculture: I am happy that the UPA schemes are being continued, but the crucial signal us ‘Price’. The NDA government reneged on its promise to give cost plus 50%. It did worse last year by giving meagre or nil increases in MSP. The budget speech makes no promise of a fair and remunerative MSP. Nor is there any major initiative to increase productivity in crucial crops.
On private investment: This is one of the four engines of economic growth, and is sputtering for the last 18 months. While several paragraphs of the speech have been devoted to public investment, there is little to encourage or attract private investment. The government seems to be unaware of the problems of the core sectors such as power, steel, coal, mining, cement, construction, and oil and gas. In these sectors, many projects are stranded and there is little new investment. Besides, there is the problem of high interest rates. I am disappointed that these issues were not addressed.
On exports: Except for one bland sentence in paragraph 86, there is no mention of exports. I think, after 14 successive months of negative growth, government has given up on the export front.
The government promised a predictable tax regime. However, Part B of the speech belies that promise. There is no major relief to the tax payer or the middle class or the small and medium businessperson. The reduction in the corporate tax rate fora very limited class from 30% to 29% is laughable. Besides there are new ceases and surcharges. Despite having an absolute majority in the Lok Sabha, government could not summon the courage to repeal the retrospective tax on capital gains (the so-called Vodafone tax) In the financial sector, only three proposals of the FSLRC will be taken up for passing legislation.The Direct Taxes Code seems to have been buried permanently. There is only a lukewarm reference to the GST Bills, but there is no promise if accommodating the legitimate criticism of the Opposition.
Finally, the government has wisely refrained from predicting the growth rate for 2016-17. The Economic Survey was restrained in assuming a growth rate of about 7%. The budget papers have given the GDP figures for 2015-16 and 2016-17 and calculated the nominal growth at 11%. If these are the government’s numbers, I would like to ask how much will be the real GDP growth in 2016-17? We know the RBI’s target for inflation in 2015-16 – 4 to 6%. How much does that leave for growth? It would be a pity that all this elaborate exercise yields, ultimately, moderate GDP growth of about 6%.
Altogether, I am afraid, the budget has been a wasted opportunity.