The finance minister ditched the sombre briefcase of her predecessors and went with a very handsome package, seemingly right out of a Khan Market boutique. You have to give the Narendra Modi administration high marks for inspired packaging. Unfortunately, the track record from Modi 1.0 has been that what you find inside the package is, usually, not as inspiring. This budget upheld that tradition.
Nirmala Sitharaman blew it. With her interim predecessor having struck all the populist notes earlier in February and a hefty electoral mandate behind her, she had a chance to present some big ideas. She didn’t. Instead, she cut a wide swathe and hit many of the requisite topics/areas one is expected to pay homage to in a budget speech: Boosting investment in select industries, investing in infrastructure, cutting taxes for some while raising those on others, simplifying “ease of living”, promises to select constituencies, some more stuff on Swachh Bharat, facilitating ease of business for MSMEs, a grab bag of measures on education, female empowerment, banking, real estate.
By the time she was done, I was trying to put my finger on what was memorable and I was left with little other than the bits about the Gandhi-pedia, a TV channel for startups and a “social” stock exchange. Oh yes, I also caught the number 3.3 per cent — a lower target for the fiscal deficit for the coming year — and was wondering which poor analyst had been left to do the arithmetic on that one. How do you make spending cuts and promise corporate tax breaks without some heroic assumptions about the economy? According to the government’s own estimates, the shortfall in tax collections this year is likely to hit Rs 1.6 lakh crore ($23 billion). I doubt that this budget’s plan to raise taxes from the highest income brackets and on petrol will close that gap.
Speaking of that other pesky thing, the economy, that is, I was also left wondering how Sitharaman’s scattering of pebbles would pave the way to the grand goal of a $5 trillion economy in time for the next election. Her pebbles were also unlikely to slow the four horsemen of the economic apocalypse: Slow-growing GDP rendered even slower once purified of all statistical skullduggery, record-high unemployment, bottom-of-the-barrel scores on the state of well-being of the average Indian, and, a global economy awash in trade wars and talks of recession.
Wait, you might say, isn’t that asking for too much from a mere budget speech? You may have a point there, if you look for the annual exercise in showcasing the finance minister’s oratory as a way to find out whose taxes went up or down, or whether the cess (gotta love that word) on diesel was changed. But if the budget is about articulating a vision, a proposal for how a government that has been returned to power with a landslide intends to take a transformational role, then one cannot help feeling somewhat disappointed. What were some of the big missing pieces in this budget? Let me name three.
First, during Modi 1.0, we heard a lot about Make in India and the imperative to grow the manufacturing sector. While the budget proposes incentives for high-tech manufacturing in products such as photovoltaic cells, lithium storage batteries, solar electric charging infrastructure, computer servers and laptops — a much more comprehensive plan across a wider range of job-creating manufacturing opportunities is needed.
Second, we had also heard during Modi 1.0 about Digital India. This budget was minimalist in this essential area. There are incentives to continue a shift towards digital payments and some platitudes about upskilling India’s youth with education in the usual cliched areas — Artificial Intelligence, Internet of Things, Robotics and Virtual Reality — but little else. At The Fletcher School, we are about to release a major study on the ease of doing digital business around the world, and India has a big distance to cover to become globally competitive. There was little in the budget that offered hope for any breakthroughs around the corner.
Third, the budget left the pressing issue of climate change out in the cold. Other than lowering GST on electric vehicles and tax benefits on loans for such vehicles, there was silence on the central existential issue of our time. Maybe it was because the monsoon had finally made an appearance in Delhi in time for the budget speech, that the issues of scorching heat and horrendous air quality had not been in the foreground.
What did I like in the budget? Let me cite three things. First, I liked the proposals to boost foreign direct investments in the targeted industries. Any move to bring in global resources to boost sectors such as aviation, insurance and the media, are welcome. I would hope more will be done to lower barriers to investments across a wider set of industries.
Second, I liked the focus on infrastructure development, both in terms of national highways and state roadways, as well as on the Pradhan Mantri Gram Sadak Yojana connecting rural areas. The complementary emphases on aviation and increasing cargo volume on major riverways, such as the Ganga, is sorely needed.
Third, I also liked, in principle, a goal to ensure that by 2022, every rural family will have electricity and cooking gas as well as an intention of undertaking sustainable solid waste management in every village. I sincerely hope the good intentions are followed by even better execution.
There were some ideas that were in the category of intriguing but annoyingly half-baked. Let me cite the one that I found the most annoying: The “social” stock exchange. What is that supposed to be? In theory, it would be a place to list social enterprises and enable them to raise funding. It feels very much like some member of the budget drafting team did some quick searches on “cool” ideas on the internet, and threw that in there. The track record on this is non-existent to thin. One of the early movers was an exchange that apparently originated in Singapore, that is now listed as an “impact exchange” in collaboration, inexplicably, with the Stock Exchange of Mauritius. Surely, we have bigger fish to fry in a high-profile budget proposal.
I would give this budget a B. Sitharaman will get another chance next year. I worry that without bolder ideas, the colour of her packaging of this year’s budget may reflect the forthcoming financial state of the country. Yes, that lovely bahi khata was a lovely bright red. Let’s hope the Khan Market boutique has a few other colours in stock for next year.
This article first appeared in the print edition on July 6, 2019 under the title ‘Why I give budget a ‘B’.’ The writer is Dean of Global Business at The Fletcher School at Tufts University, founding executive director of Fletcher’s Institute for Business in the Global Context and a non-resident senior fellow of Brookings India
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