PrintFriendlyBy Kishore Desai
It is not unsurprising that the first full budget of the Modi 2.0 government was one of the most anticipated events. From the political perspective, it was being presented post elections that witnessed the Prime Minister and his government receiving a thumping mandate from people across the country. The BJP not only got a clean majority enough to form government on its own but it also managed to surpass its last tally which itself was a record of sorts. The verdict sent a clear message: that people across the country and from all sections of the society overwhelmingly voted in favour of various development initiatives rolled out by the Modi 1.0 government in its first term. More importantly, the scale of the verdict also indicated that people have wholeheartedly accepted the Prime Minister’s vision for development and they want him and expect him to do whatever it takes to transform India to a New India within a time bound manner.
From the socio-economic perspective, the budget was being presented at a time when domestic growth environment faced headwinds. Economic growth, though it continues to remain robust, faced downward risks. Besides these, the global trade and economic growth environment remains a bit shaky and uncertain. Given these perspectives, the budget naturally presented a gamut of proposals taking into account the above political and socio-economic drivers. The following three distinct messages stand out.
Continuing the governance philosophy of “Sabka Saath, Sabka Vikaas and Sabka Vishwas”: The budget design indicates that the broader priority of the government, while allocating financial resources, is to continue pushing the governance philosophy of “Sabka Saath, Sabka Vikaas and Sabka Vishwas”. In its first term, the Modi government had rolled out a number of policy initiatives aimed at realizing an inclusive environment for development. The budget builds upon those initiatives and provides a clear policy direction to further accelerate the pace of implementation in a time bound manner. A commitment has now been made to the people that every family (except those who are not willing) will have access to electricity, clean cooking gas and a house by 2022 through the Ujjawala, Saubhagya and Pradhan Mantri Awas Yojana respectively. It also promised a new initiative to provide piped water supply to all households by 2024 under the Jal Jeevan Mission. Several other ongoing initiatives such as Ayushman Bharat, expansion of e-National Agriculture Market, provision of structured financial support to all farmers under PM-KISAN, boosting rural connectivity by connecting rural roads to markets etc. were also carried forward. More steps have been proposed to provide adequate financial resources for the rural economy. This list ofcourse is not exhaustive. But these measures clearly show that the general direction of policy is to enable, empower and provide access to development opportunities for everyone – the basic essence of the philosophy of “Sabka Saath, Sabka Vikaas and Sabka Vishwas”.
Aspirational target for a New India – presenting a Blue Print for a US$ 5 trillion economy in 5 years: The second theme in the budget was that for the first time it set a clear policy target for making India a US$5 trillion economy in 5 years. Considering that this year the Indian economy is likely to become a US$ 3 trillion economy, the budget sets a target of increasing the size of economy by around 70% in the next 5 years (i.e adding USD 2 trillion in the next 5 years). It does not merely stop at setting this ambitious target, but it also provides a clear policy strategy to achieve the same. In her speech, the Hon’ble Finance Minister sums up the strategy in the following words, “To attain this and more we need to continue undertaking many structural reforms. In the last five years, we saw many big reforms in particular, in indirect taxation, bankruptcy and real estate. While these reforms were happening here in the Parliament, the common man’s life was being changed through MUDRA loans to help him do his business, and through several programmes it was being ensured that his/her kitchen had become smokeless, his/her house got electricity connection and women’s dignity was respected with the provision of toilets in homes. The common man was served even as major transformational reforms were being rolled out……… And for this to continue we need to invest heavily in infrastructure, in digital economy and on job creation in small and medium firms”. In line with this strategy, the budget provides for a massive push to create next generation infrastructure through several initiatives such as creation of industrial corridors, dedicated freight corridors, Bhartamala and Sagarmala projects, Jal Marg Vikas, regional air connectivity, NABH Nirman for new airports development, modernizing Railways, redevelopment of stations, creation of new Urban Transit Systems, Regional Rail Transit Systems, bullet trains, pushing e-vehicles through FAME etc. For this purpose, it envisages a massive investment of INR 20 lakh crores per year going forward.
Not losing sight of immediate challenges while implementing a long term vision: While the Budget lays down a road map for implementing a long term development vision, it also provides policy fixes to address immediate challenges. For example, to alleviate the ongoing stress in the Non-Banking Financial Companies (NBFC) sector, the Finance Minister announced a number of measures. As part of providing a one-time relief for this sector, the Minister also said “NBFCs that are fundamentally sound should continue to get funding from banks and mutual funds without being unduly risk averse. For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rupees one lakh crore during the current financial year, Government will provide one time six months’ partial credit guarantee to Public Sector Banks for first loss of up to 10%”. Besides NBFC, the Budget also provided a range of policy measures to recapitalize the banking sector, boost financial markets, improve housing industry regulations, deepen the market for long term bonds etc. All these measures clearly indicate that the budget has not lost sight of the need to adequately address short term challenges while rolling out a plan for long term.
And all of the above measures were proposed without compromising fiscal prudence. And this is targeted to achieve through some interesting measures to boost revenues – strategic disinvestment and smart monetization of public sector assets being crucial pillars. Effectively, the Budget deftly carves out a clear plan for realizing the above themes thus laying a foundation on which the vision for New India would be realized. That said, what’s equally important going forward is ensuring the implementation of these proposals on ground. Given the past record of the Modi government in implementing its talk consistently, one can be fairly certain that it won’t be an area of concern.
(Public Policy Professional and former OSD, Economic Advisory Council to Prime Minister)