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The Strategic Jog of the Marathon

The Strategic Jog of the Marathon

By Aadya Sinha

Edited by Liz Maria Kuriakose, Associate Editor, The Indian Economsit

As someone who was looking forward to the promised ‘bitter pill’, the ‘Union Budget 2014’ was a bit of a disappointment. In a classic case of ‘something for everybody but not enough for anybody’, Arun Jaitley, lost what could have been a great opportunity for some decisive decisions. With the mandate fresh in people’s minds and the opposition having nothing more to add than noise value, the timing to take some hard decisions was optimum. Still, there are a number of points for discussion in this budget.

Let’s get to the biggie first. Jaitley, wants to try and maintain the fiscal deficit at 4.1%. Normally, this would be great news, except that the realist in me finds it to be a bit ambitious (Especially with the direct tax exemptions). Despite the surcharges remaining the same, receipts from taxes are going to go down by approximately Rs 5,000 Crores. Adding to this are the disinvestment receipts, the signs indicate that maintaining a 4.5% deficit will be difficult. The only way this can be managed is, if the Centre plans to streamline the expenditure through some serious efficiency, or by liquidating capital assets later on. That however, remains a doubtful goal to me. However, it does give the markets an upward nudge right before closing.

Unlike the others, I’m not too worried about the lack of subsidy reduction. Due to the interdependent nature of the three big subsidies on fuel, food and fertilizers, their gradual removal is the only way to go about it. For example, it is impossible to reduce fertilizer or fuel subsidies without increasing food subsidy by a significant amount. What I did appreciate were his efforts to increase the efficiency of storage, transportation and the public distribution system. Assuming, these measures are executed well enough, food prices will see a substantial reduction. This will not only help curb the food inflation, but will help the removal of fuel and fertilizers subsidies without much of a backlash. In the long run, this is a sensible approach to remove the ‘untouchable’ and empirically wasteful food subsidy in India. Further, the international climate, especially in the Middle East and the investor hostile perception of India, mean that the conservative view on subsidies is justified for now.

The first part of the budget thus clearly indicated the need to concentrate on long term structural measures, rather than short term dole recovery.

It was a rude shock then, when the second part was presented.

As far as the social sector was concerned, the budget allotted a significant amount of money to many small schemes. While they explained their objective in implementing the schemes, it seemed like more of a ‘new bottle, old wine’ continuation of the UPA agenda. The names were different but there was nothing standing out about these schemes. What was also repeated was the use of PPP to fund such products. While Public Private Partnerships do sound promising, he didn’t highlight how he would ensure efficiency in the same.

The only new turn, seemed to be the money allotted for Ganga Cleaning, River and Ghat beautification projects, for which Uma Bharati was noticeably grateful.

The budget did pick up pace and garner interest during its third part. The encouraging measures in investment involved simplifying the customs laws and resolutions in the major dispute areas. The clear welcome mat rolled out to foreign investors too, is a welcome change to our stagnant economy. The power and manufacturing sectors went home as the biggest winners, with massive incentives for investment and job creation in those zones. The budget also seemed in line with the Infrastructure and housing sector expectations, giving the engine of the economy a much needed boost.

What was most conspicuous by absence though, were the revision of retrospective taxes. While the President’s speech and interim directors indicated the repealing of these laws, Jaitley has only promised, the setting up of a committee to look into the same.

All in all, the two and a half hour budget was a small step in the right direction. Even though, I expected more, after the initial alacrity shown, I comprehend the need to be cautious. And, in light of the mismanagement seen over the last few years, I’ll take it.

Aadya is your textbook bibliophile, as redundant as that statement sounds out loud. She finds solace in all that is and all that can be written. She is also  utterly obsessed with politics, as a’pol’ing as it might get.

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