Was a lacklustre Union Budget designed to lower our expectations from the Modi sarkar?
A spectacular election campaign, the promise of dramatic change-growth-reform, a thumping victory with the biggest mandate for a single political party in three decades and then the diplomatic coup of his swearing in ceremony—all these had combined to raise expectations from the Modi sarkar to a frenzied high. You could even say that we had begun to expect that Narendra Modi as prime minister (PM) would be nothing short of Rajnikant on screen!
And then came a disappointing Budget—on taxes and spending. If the objective was to dampen expectations, then one must say that the Union Budget did a darned good job. But the collateral effect is the confusion it has created about whether the Bharatiya Janata Party (BJP), despite the brute majority in the Lok Sabha, has the gumption to break away from decades of socialist policies and the doles and subsidies that sustains India’s political parties and their leaders.
It would be correctly argued, in favour of Modi sarkar, that it is unfair to judge a Budget that had to be cobbled together in 45 days. Especially when there was little room for manoeuvre due to the fiscal mess inherited from the United Progressive Alliance (UPA) and the looming problems of a scanty monsoon and soaring crude oil prices. But isn’t it all the more reason for the government to have kept the Budget short and crisp, even if there were no big ideas or momentous announcements? We are now left wondering—kya achche din ayenge? Kab ayenge?
Let’s take a look at the source of confusion. We know that Narendra Modi inherited a fiscal mess and years of scams and profligate government spending with no accountability. We also know that the government had to find new ways to raise funds, to cut the fiscal deficit as well as for the promised relief from tax torture. But one expected fresh thinking and innovative solutions.
A big expectation from the Modi government is better days for entrepreneurs and an end to harassment and extortion by the multiplicity of local and state agencies and their taxes, levies and endless compliances. Prof R Vaidyanathan from IIM (Bengaluru) has long been considered an important advisor to senior BJP leaders.
His two important areas of research and insight were: the black money menace and the problems of what he calls India Uninc, comprising innumerable tiny entrepreneurs who keep India’s economy chugging along, despite the government. None of Prof Vaidyanathan’s ideas in these two areas finds any reflection in the Budget; but, as he would say himself, let’s give the government at least six months before making up our minds.
Second, one of the NDA (National Democratic Alliance) government’s first actions was to set up a special investigation team (SIT) to unearth black money. It appears that we should not expect anything concrete to happen in the next eight months.
A third expectation was about curbing wasteful expenditure. There was talk that the government would shut down the Planning Commission, eliminating not only a big source of wasteful expenditure but also misallocation of resources that such ‘planning’ exercise leads to. That did not happen. Instead, all we got is an ‘Expenditure Commission’, which will deliberate on ways to cut expenditure! This, again, means that we should not expect anything in the period of this Union Budget.
A fourth expectation was the promise of vikas (development), parivartan (change) and the slogan ‘minimum government, maximum governance’. All of this will happen, if the government can find the resources.
The Budget talks of public-private partnerships (PPPs) to bring in much needed investment in railways, gas pipelines, airports and roads and foreign investment in some others. This is positive; but, remember, all this requires buoyant capital markets and interest among foreign and local investors.
A slew of multinationals had also stayed back in the hope that Narendra Modi will work to improve our ranking from the bottom of the list of ‘worst countries to do business in’. Like the credit rating agencies, which have made their unhappiness with the Budget clear, international investors have also switched their stance from optimistic to watchful, while being gung-ho in public.
On PPPs, we need the Modi government to ensure that it is vastly different from partnerships struck by the UPA regime. Under the UPA, private funding usually came from the public sector banks and ended up as bad loans that will be dumped on taxpayers.
Right to Information (RTI) activists have discovered to their shock that even the concession agreements signed with private companies are missing. Former central information commissioner (CIC) Shailesh Gandhi also confirmed this. Modi sarkar has to demonstrate that it will make PPPs accountable and they will not be just a means of transferring public assets into private hands. Otherwise, a new set of scams and controversy can get created.
Two other sources of funding identified by the government are: massively higher tax revenues (which does not signal achche din at all) and disinvestment of the shares of public sector undertakings (PSUs), ostensibly to enhance public participation in these national assets.
When Mr Modi was sworn-in as prime minister, public sector shares shot up on the expectation that good companies would get more autonomy and be the big value-creators under this government. We hope the government will deliver on that expectation, especially if it wants retail investors to participate in the exercise.
The only big phase of disinvesting PSUs happened during the Vajpayee government; it is expected that a five-year Modi government will go beyond the sale of PSU shares in the stock market mentioned in this Budget. Disinvestment too must be done differently under Modi sarkar. NDA-I had sold Modern Bread, Hotel Corporation of India (which owned Centaur Hotels) and a clutch of rundown, but extremely well located, hotels.
These were sold as going-concerns (rather than break up value that would have taken into account valuable realty) to ensure continuity of employment and production. It was a jackpot for private bidders and the original premise for selling them cheap was quickly forgotten. Hopefully, Mr Modi will, at least, use his direct connect with ordinary people to explain the idea and purpose of disinvestment in the coming years. No government has dared to do this in 30 years with the result that disinvestment was always non-transparent and portrayed as a dirty, surreptitious sale of family silver.
Transparency and accountability will be important even to fulfil the promises made by the Railway Budget. The railway minister admitted that most money earned by the railways goes towards salaries and maintenance (which is also crumbling), leaving little leeway for modernisation or growth. Although most people accept that a fare hike was long overdue, it is not enough. We need to see if the PPP route is used as effectively as promised to improve cleanliness, quality of food and public amenities.
The task before the government is monumental. Fortunately, and what we have seen so far, all is not negative. The ministry of corporate affairs (MCA), at least, has made several announcements that signal an understanding of what really hurts those who want to operate transparently and within the law. Will this transmit to other ministries too? There is a lot that needs to be done in almost every area—power, aviation, defence, infrastructure, mining and environment—will be some keenly watched ministries. Meanwhile, we must admit that we have switched from achche din aagaye to acheche din kab ayenge? When will we see better days?
Sucheta Dalal is the managing editor of
Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at
[email protected]
Most scams arose from the PPPs and therefore, there is imminent need for looking at the detail and give a framework for PPPs sector-wise and to this end an announcement did figure in the Budget. It is to be hoped that the GoI would quickly come out with the solution.
Planning Commission - the Yojana Bhavan, a euphemism for Bhojana Bhavan, meaning the eating house of resources of exchequer for decades- has to be wound up.
The other institutions that need purging are University Grants Commission, AICTE that have killed the higher education and technical education with their luxurious working.
More than the speed it is the actual action that would be watched by at least the informed electorate.
It is too short a time to comment as NM does not have a magic wand !
I expected a comment from U on whether U find any positive shift in this budget wrt UPA regime.