There is a set ritual for Budgets in India. The mandatory photo-op with the red, leather briefcase; the speculative stories and the (sometimes) manufactured expectations aimed at manipulating the markets; the banging of tables by the Honourable MPs each time the Finance Minister announces an increase in outlay; the groans and protests that accompany a hardship measure or a tax increase; and the set reactions that range from the Budget being described as “pro-growth” or “pro-people” to it being debunked as “anti-people”, “inflationary” or “pro-rich”.
If Finance Minister Nirmala Sitharaman had not announced the tax hikes of diesel and petrol — something that many Finance Ministers in the past had carefully kept outside the Budget — the 2019 exercise would have broken entirely from the past. Beginning with the red, cloth-bound covering for the Budget speech and extending to the niggardly use of actual monetary outlay — which, in case, is there in the Budget documents in case anyone was anxious to find them — she tried to do what has been proffered as good advice to Finance Ministers: that a Budget speech should not be an accountants charter.
Having received a resounding mandate on the strength of a promise to usher a New India, the Narendra Modi Government attempted to use the Budget speech to underline the policy orientation and the broad allocation of resources to meet the objectives. The problem was that the broad contours of this approach had already been set out during the long and exhaustive election campaign. Housing for all, drinking water for all, electricity for all, sanitation for all and a proud, resurgent and globally relevant India — these have been the themes of Prime Minister Modi's vision statements. These were repeated with characteristic understatement by Sitharaman.
Consequently, the Budget did not appear to be dramatic. There were no significant tax increases or tax cuts. No new flagship projects were announced. There were simply clarifications or elaborations of what is existing policy.
This is not surprising. Modi has been in office for a little more than five years now. Right from the beginning he has seen his time in office as a 10-year project. The flight path was charted in 2014 and barring the adjustments to take into account mid-course turbulence and unexpected air pockets, he has had no real reason to deviate from the route. To the outsider who takes Budget speeches at face value, this presumes that the Government is ‘incremental' in its approach and in policy terms no different from Congress-led Governments. Disinvestment may have been initiated by the Atal Bihari Vajpayee Government but it was also shored up by the Manmohan Singh regime. As for welfare programmes, they were begun in a big way by Indira Gandhi and kept up by successive regimes.
So what is the difference? The real difference lies in Modi's indefatigable commitment to effective implementation. Rarely have we seen a Government in India that expends so much political and bureaucratic energy in ensuring that its welfare schemes actually makes a difference on the ground. Earlier Governments made lofty announcements, set aside and spent huge amounts on pet projects and sometimes even secured handsome electoral returns from these. What they didn't do or did patchily was to see how the schemes actually translated on the ground. Modi's Government focused single-mindedly on delivery and, as a result, secured a huge incremental vote that was undetected by the pundits and pollsters who viewed Indian politics through the prism of vote banks.
Secondly, contrary to beliefs that a ‘right wing' Government must necessarily follow the prescriptions written by Margaret Thatcher and Ronald Reagan, not to mention economists that challenged the post-War Keynesian consensus, the Modi Government has been remarkably non-doctrinaire. Yes, there is a loose commitment to move away from statist development and encourage the rise of private entrepreneurship. But this commitment has also been accompanied by pragmatism. Where necessary and possible, the private sector has been given a huge leg up. This year, the Government moved a big step forward in meeting its earlier commitment — made by Arun Jaitley — to lower corporate taxes to 25 per cent. Sitharaman has also set out big incentives for start-ups, including the assurance to look the other way at the source of money funding new ventures in specified fields. The underlying belief is that “bad” money will find avenues of profitable investment in “good” ventures and be used in India rather in the purchase of real estate overseas.
Thirdly, while specifying that the swadeshi of yesteryear now means Make In India, the Budget has attempted to create an environment whereby foreign direct investment —singed by its experiences in China and alarmed by the US-China trade wars — will look to discover the virtues of investing in India, a country with a huge domestic market. Of course, there are parallel steps a Government must take that goes beyond fiscal incentives. These include labour flexibility, judicial efficiency and skilled manpower. The Government has committed itself to all these. The question is the pace of implementation.
This Budget will not make it to the list of the famous and the infamous. It was in effect a mid-course review document and in many respects unremarkable in terms of originality. But experience tells us that the countries that are relevant in the world today are those where Budget days pass normal people — except smokers and drinkers — unmoved. In a tentative way, India is approaching that stage. This is very good news.
