Union Finance Minister Arun Jaitley was hamstrung by the lack of fiscal space and the limited time he had to put the Budget together.
In a post-Budget interview, he clarified that he was forced to negotiate within the fiscal space bequeathed by the previous dispensation without upsetting the applecart within 45 days of government formation.
Government expenditure as a percentage of the GDP for 2014-15 proposed at 13.9 per cent is only marginally higher than the interim Budget estimate of 13.7 per cent.
The gross-tax-to-GDP ratio, however, is down slightly from 10.7 per cent to 10.6 per cent. Mr. Jaitley has retained the fiscal consolidation targets and roadmap for the next three years, which can only be read as a vote for continuity. He even retained as a challenge the fiscal deficit target of 4.1 per cent set by his predecessor.
Mr. Jaitley said he would pursue fiscal prudence as “we cannot go on spending today which would leave behind a legacy of debt for our future generations … and be financed by taxation at a future date.” In line with the observation, he proposed an expenditure management commission and promised to increase the tax-GDP ratio. He, however, did not say how he planned to widen the tax net. Without going into the specifics, he proposed an overhaul for better-targeted fertilizer, fuel and food subsidies. “Should we be victims of mere populism or wasteful expenditure,” he asked but projected the subsidy bill to go up by about Rs. 5,000 crore.
“Welcome to the real world… BJP sought a mandate for Congress Mukt Bharath. My friend, Arun Jaitley, would have realised that it is not possible to have even a Congress Mukt Budget,” former Finance Minister P. Chidambaram said noting that his successor shunned “election rhetoric” and “uninformed diatribe.”
Breaking away from the tradition of poetry or inspirational quotes, Mr. Jaitley’s staid 126-minute speech was the longest ever. In between, a shoulder cramp forced him to break his speech, after which he read it out while seated.
Big-bang allocations The big-bang allocations of the Budget went to energy and transport — Rs. 1,66,275 crore and Rs. 1,16,202 crore, respectively. Urban infra development also got giant allocations. The enhancing of the Pooled Municipal Debt Obligation Facility corpus from Rs. 5,000 crore to Rs. 50,000 crore should provide the necessary fillip to urban infra development. Capital outlay for defence went up marginally by Rs. 5,000 crore but the overall defence budget stays at the interim Budget level of Rs. 2,29,000 crore.
The Finance Minister promised to stay clear of retrospective taxation in the future, but did not deliver on neutralising the UPA government’s controversial retro-tax amendment.
Allocations seemed to lack perspective in several areas: while the Prime Minister’s pet project, the Statue of Unity of Sardar Vallabhbai Patel in Gujarat, received Rs. 200 crore, the proposed 10 new IITs and IIMs got only Rs. 450 crore. According to official data, setting up a new IIT costs Rs. 1,800 crore over a period of five years. The Pandit Madan Mohan Malviya New Teachers Training Programme initiative received just Rs. 30 crore.
To tackle inflation, the Budget proposes a Rs. 500-crore Price Stabilisation Fund and affirms the Centre’s commitment of support to States for setting up private market yards and private markets.
The big thrust of the Budget is on the farm sector where a protein revolution is a new idea as is the unbundling of the Food Corporation of India. Other steps mentioned include soil health cards, an agri-tech infrastructure fund, a technology-driven second Green Revolution and greater focus on irrigation, all of which could enhance agri-productivity.
The Finance Minister made 28 token Rs. 100-crore allocations to a slew of schemes and initiatives ranging from a scheme for the girl child, Beti Bachao, Beti Padao (Save the girl child, educate her), to one promoting good governance. The Finance Minister quoted the PM’s slogan of inclusiveness [ Sab ka sath sab ka vikas ] but fresh allocations for the minorities were limited to just Rs. 100 crore for madrassa modernisation.
It was a mixed bag for the corporate sector. Concrete ideas for taking the Goods and Services Tax forward remained elusive. The revival strategy for the manufacturing sector is limited to the tinkering of some customs and excise duties, particularly in the sectors of steel, solar, food processing, electronics, petroleum and wind.
The Budget promises speedy resolution of pending iron ore mining issues through an amendment to the MMDR Act, 1957.
