Unlike the first two budgets of the NDA government, the Union Budget for 2016-17 involving an expenditure of close to Rs 20 lakh crore, has a visible stamp of Prime Minister Narendra Modi who had indicated a day in advance how confident he was to pass this “annual exam”. A close analysis of all his recent comments had given an indication how he was not too pleased with the way the corporate India keeps pestering about concessions without merit. While he may not have grudged some relief to the salaried middle class by way raising the income tax exemption limit, serious problems were visible in the entire rural landscape, just on the brink of a crisis. A grassroot politician in him with experience of working closely in the agriculture sector as Gujarat chief minister would have prompted Modi to compel a course correction on Finance Minister Arun Jaitley, without bothering too much about momentary ups and downs in the stock market. The change in the strategy, also influenced by the impending assembly elections in key states, is quite evident in the go-slow on the promised cut in corporate tax, which has been just tinkered with. More taxes and levies have been brought in by Jaitley on cars, jewellery, branded apparels, income on dividends, etc, all resulting in a net revenue gain of Rs 19,610 crore.  

To be fair to him, the finance minister has brought under focus a distressed rural economy without being populist and throwing freebies. The Rs 87,765 crore investment in the countryside is earmarked in building the much required infrastructure in irrigation, rural roads, digging of ponds, organic farming and above all, doubling the farmers’ income by 2022. Some quality is also being infused into the rural job scheme with a tidy outlay of Rs 38,500 crore. With successive monsoon failures, low wages and small raises in the Minimum Support Prices, the rural sector was in a deep trouble. Such a realisation is not only a good politics but also excellent economics since it would lead to a bottom up demand push.

Besides a rural imprint, the budget with a Plan expenditure of Rs 5,50,000 crore, 15% increase over the previous year, places great emphasis on the road and rail infrastructure, together claiming Rs 2,18,000 crore. Allocation for social sector including education and health care at Rs 1,51,581 crore gives some socialist face to the government. It is a well thought strategy since there is not much scope for investment revival in manufacturing, at this stage. Increased investment in infrastructure is the only way left to revive the business sentiment. Overall, it is ‘Modinomics’ to be navigated by Jaitley who has managed to stick to difficult fiscal deficit targets though without sharing the numbers on the Seventh Pay Commission.