Before I write anything on the budget, let me give the only input relevant to AP. The only reference to AP was made when FM said all provisions of the State reorganization bill will be adhered to. In other words, he is saying again in parliament, that all promises made to AP will be fulfilled. Welcome statement, though only God knows when these promises will be met.
Now coming to the topic at hand, Arun Jaitley’s second budget was short of any great sensation. The speech itself was too long and mostly spoke of the Prime Minister’s pet themes like Jan Dhan Yojana, Swatchh Bharat etc.”Make in India” figured quite e few times in the speech but it is anybody’s guess if the budget has enough power to give impetus to manufacturing. I will give a very short list of what I thought was good and what was not so good.
- The best thing about the budget was a proposal to offer “plug and play” power plants for bidding. Which means that these come with all clearances so that the winning company does not have to waste time anymore on clearances. One wishes such projects be rolled out in other key infrastructure sectors too.
- The other good thing about the budget is on offering not just transparency on policy but also offering stability of policy for the next few years. Reduction of corporate tax over the next 4 years, deferring GAAR by two years, ruling out any retrospective taxes all are very positive for corporates.
- There is also an effort to somehow divert savings from physical assets to financial assets.
- FM also gave an inkling into proposed anti-black money law ( both foreign as well as domestic holding of black money). Though some proposals looked very stringent, it is indeed welcome. Of course, we need to wait for the final law to come.
- There are also some more positives which are small in nature and will not have a large bearing on the economy.
What is not so good
- This budget, like Jaitley’s first, is also incremental in nature. After 2 budgets by the present Modi government, one can be excused to conclude that these guys just lack the ability to think big-bang.
- I for one, am convinced that India’s problems are just too large which can not be solved by incremental action and need some really bold thinking. This budget lacks that.
- For example, we are now seeing almost 1.2 crore educated youth coming into the job market every year and this number will also increase going forward. Which simply means that during the next 7-8 years we need more than 10 crore new jobs just to keep our unemployment levels at the same degree. I can not see anything in this budget which can address this impending catastrophe.
- Service tax has uniformly been increased from 12.36% to 14%. There is also a proposal to add more services to the basket.This will pinch the common man in many ways which he can not see today.
- Even though the FM has increased the fiscal deficit target from 3.6% to 3.9% there by allowing himself more room to spend, I feel this step is neither here nor there. This may add to inflation while not giving any commensurate returns on growth.
In summary, this budget is a non-event and will have no place in India’s economic history. It will mostly likely be forgotten in a few hours. I am not writing exhaustively on the topic as this is not a forum on Indian economy