Arguably the most significant achievement of the latest budget was realised right at the beginning. The Finance Minister's budget speech is a good example of managing expectations. That task might have been made easier by Pranab Mukherjee's less than flamboyant style, as compared to his immediate predecessor, of delivering budget speeches and the fact that there were few major expectations this time.
It may be a gross overstatement but the Finance Minister's way of functioning does seem to set the level of expectations whenever major economic policy statements are made. Equally important, the fact that there were fewer expectations this time may be due to the growing awareness of economic matters on the part of the man on the street. That, one should think, is a direct consequence of economic liberalisation which has in a major way inducted many sections of the society into the economic process.
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The budget exercise, with its own brand of secrecy and mystification, had enthralled people much before the television age. But other economic announcements — the credit policy (now in four instalments around the year) and even the foreign trade policy — are also keenly watched and analysed nowadays.
The reason, of course, is that more people are actually participating in the economic process than ever before and would like to scan and analyse economic policy documents for their own understanding. There are home loan buyers concerned about interest movements on their mortgage loans. Home loans did not have floating rates and normally borrowers could not get their interest charges reduced.
Plenty more people travel abroad and therefore have developed a vested interest in the dollar rupee exchange rate. Not very long ago, foreign exchange entitlements for travel and many other purposes were restricted. Also, banks bought or sold dollars at fixed rates that were changed rarely.
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There was no scope for anticipating better exchange rates. Large segments of the society thus had no need to scrutinise monetary and credit policies.
For many, the budget was only about personal taxation, the reliefs doled out and the inevitable hike in the duty on cigarettes and other ‘sinful' goods. Few were concerned about subsidies or fiscal consolidation.
All that has changed as many more citizens are beginning to be aware of the subsidy behind their LPG cylinder or how reckless government spending could harm future generations. Economic development in this country may not still be ‘participative' in the fullest sense but increased awareness of the context in which official policies are framed and acted upon has conferred large benefits on the government and citizens alike.
Major reform measures
For instance, this time everyone realised that the introduction of two important, much talked about tax reform measures — the Direct Tax Code and the Goods and Services Tax (GST) — would be further delayed.
These were the two subjects that had engaged everyone. The government had circulated a discussion paper on the Direct Tax Code, while the modalities of the GST have been discussed by a select group of State finance ministers. These two are admittedly technical subjects to be discussed by tax experts but what is important is that ordinary citizens have been able to connect with them.
It is true, as the Finance Minister reiterated this time, the Union budget cannot be a mere statement of government accounts and has to reflect the government's visions and policies to come.
It is also admitted that very often it is not the dull numbers — pertaining to gross fiscal deficit, gross borrowings and so on — that excite the average person as much as the announcements relating to the directions in economic policies that finance ministers make in budget speeches.
The realisation that ‘big-bang' announcements are not always possible is another plausible reason why expectations are muted on the eve of the budget.
In the event, one can look at the budget document in a balanced way without having to focus on any spectacular announcements.
Principal challenges
The three principal challenges for the government over the medium term are: (a) To quickly revert to a high growth path of 9 per cent and then consider measures to move the growth rate into double digits; (b) To consolidate recent gains and make development more inclusive; (c) To improve governance in government systems so that bottlenecks in delivery of goods and services by government agencies are removed.
These are statements of intent that everyone can relate to.