A good Budget for most reasons

Budgets are often labelled as pro-poor or pro-rich, populist or pragmatic, too cautious or very bold. Finance Minister Arun Jaitley’s first full-fledged Budget defies such classifications as it has elements of all these categories. He has tried to reconcile two broad imperatives of the government: a progressive social policy and a dynamic economic growth strategy. In the long run, these two should not be in conflict, but they are often presented as alternatives. The focus of the NDA has been considered to be more on growth than social capital. But politics has perhaps persuaded it to present a robust agenda of social welfare and security, meant for the poorer sections, senior citizens and other weaker groups. The proposals revolve around pension and insurance schemes and may be operated through financial inclusion plans. The agricultural sector and even the MNREGA have got strong support. 

At the same time, the Budget gives a big boost to the corporate sector and seeks to create a ground conducive to faster growth of industry and business. Corporate tax is to be cut by 5 per cent over the next four years. Infrastructure development is to get higher priority and allocations with new sources of funding and strategies. The national infrastructure fund and tax-free infra bonds are innovative ideas. There is an attempt to increase the savings rate to finance investment. Legislations and methods to ease the problems in doing business are planned. A host of other ideas have also been presented. Doing away with retrospective taxation and the distinction between FDI and FII, the postponement of GAAR, steps to help small businesses, formulation of a bankruptcy code and a rational direct tax regime, and better dispute resolution methods are among them. The introduction of GST next year will mark a quantum jump.

The gold monetisation scheme and the proposed stringent legislation to deal with black money deserve special note. Both, if implemented effectively, can deal with the problems of unproductive savings and illegal wealth. There is a commitment to fiscal consolidation and prudence, though the deficit target has been relaxed from 3.6 per cent to 3.9 per cent of the GDP for 2015-16, and the 3 per cent goal has been postponed to the next year. This was perhaps unavoidable because of the reduced fiscal room for the Centre after the promised flow of enhanced resources to the states.  The middle class and individual tax payers may have a grouse that they did not benefit. But the overall impact of the budget on the economy should be positive, though, perhaps, only over the medium term. It can strengthen some of the declared themes of the government, like the Make in India programme.