A ‘bhoomi pujan’ for reforms
Mar 03, 2015
S. Vaidhyasubramaniam
The “Budgetometer” and its elsewhere equivalent played the real hero — caught in between the ecstatic urge to give a 10-plus and the understandably unreasonable rush in search of a negative score, it restricted oral and digital ends from having a free run. In an academic’s dispassionate analysis after seeing the answer paper and not just the question paper, the 2015-16 Budget deserves a high pass with distinction for its passionate nationalism. Just as water finds its own way, finance minister Arun Jaitley and his team have chosen their own way to crack the “Super-Budget Exam” created by the media. Embedding choice in the question paper is an examiner’s virtue. Picking the right questions for which there are right answers is where the examinee makes the difference. It is an examinee’s talent to avoid wrong questions with right answers; right questions with wrong answers and the less said about wrong questions with wrong answers, the better. Moving on from a series of Budgets that were a mixed bag, this Budget seems to have picked the right questions to provide the right answers.
No worries on fiscal deficit
The Budget positively reflects the sentiments of many Washington institutions on the potential of an Indian economic upsurge. The global crisis as a God-given excuse took a backseat as Mr Jaitley announced the arrival of India in the opening paragraph of his 133-paragraph Budget speech. The FM candidly admits that this Budget is a “roadmap for accelerating growth, enhancing investment and passing on the benefit of the growth process to the common man, woman, youth and child.” The ability to drive on the economic highway, without having to struggle through the congested economic contours, has given the FM an opportunity to present a directionally reformist Budget rather than a directionless populist one. For the fiscal disciplinarians, the 3.9 per cent fiscal deficit against an anticipated 3.6 per cent is not a major concern to worry on two counts — consequential delay in interest rate reductions (a huge relief for the high savings appetite households) and most of the spending will be in quality investment. Fiscal discipline: No big worries.
Hard and soft assets
Social schemes such as Jan Suraksha, Jeevan Jyoti and Senior Citizen Welfare Fund, have put India’s most vulnerable yet functionally successful micro-economic unit — the average Indian family, in a secure ecosystem with large-scale reach, touching the lives of crores of deserving poor. The promise of infrastructure progress through an additional allocation of Rs 70,000 crore, creation of tax-free infra-bonds, National Investment and Infrastructure Fund certainly entails a long-term vision. The Budget seems to have addressed the needs of India’s soft and hard assets — families and infrastructure. The only concern is the translation of intent to implementation.
Uncorking rural and youthful India’s potential
The Atal Innovation Mission and the Self-Employment and Talent Utilisation scheme as techno-financial, incubation and facilitation centres, with Rs 100 and Rs 1,000 crore allocation respectively, will bring research institutions, ideas and marketplace closer to each other. This is a much-needed interface as India’s ideation needs a good bridge that connects ideas to the marketplace. These, along with the Rs 1,500 crore Deen Dayal Upadhyay Grameen Kaushal Yojana, have the potential to uncork the skill, entrepreneurial and employment potential of India’s rural and youthful population.
Shining metal and mettle
Can the International Cricket Council survive if Board of Control for Cricket in India bans cricket in India? Can the global gold market survive if India stops buying gold? Both will not happen but both suggest the extent of power and the positive potential that needs to be unlocked. A country that has consistently remained one of the world’s largest purchasers of gold, needs to unlock the hidden potential in accounted gold and incentivise the booming potential in hidden gold. The Budget does the first through a gold monetisation mechanism using three options, all of them together laying down the foundational pathway to reach the second. Noted thinker S. Gurumurthy has written enough about the gargantuan size of hidden gold and if the second part is also done in the ensuing years by the FM, India can control the global gold market and also tacitly address the current account deficit and balance of payments.
The Budget has not only looked at the shining yellow metal but also lifted the spirits of India’s economic mettle — the small and medium business enterprises run by proprietors and partners (P&P). Prof. R. Vaidyanathan, in his book titled India Uninc explores the Indian economic architecture and according to him, the real national economic players are not highly educated and the P&P constitute the entrepreneurial non-corporate sector which provides 90 per cent of the country’s employment and is 45 per cent of India’s economy, which is three times the corporate share of economy. The formal banking system has failed to serve the small and medium enterprises with adequate financial support covering less than 10 per cent of the people involved in the non-corporate sector. The remaining 90 per cent, as if they are “financial outcastes”, borrow at usurious interest rates hitting the roof and despite this strangulation are by and large successful. A much needed relief in the form of access to capital at competitive cost has come in the form of the Micro Units Development and Refinance Agency (MUDRA) with an initial corpus of Rs 20,000 crore and credit guarantee support of Rs 3,000 crore. MUDRA is an elixir of capital immortality for many first generation entrepreneurs and “unorganised” business groups. Viewed with the promise to modernise the bankruptcy law, the FM has oxygenated the entrepreneurial lifeline of India freeing it from the fear of failure and easing the pressure on access to formal finance.
The Indian culture of leaving a “drishti alankar” for every good action comes in the form of the service tax increase to 14 per cent. Annual Maintenance Contract (AMC) is a growing killer expense for educational institutions and runs opposite to an honest effort to reduce the unit cost of education at all levels. As a selfish academic for a noble cause, I appeal to the FM to waive service tax for AMC that educational institutions pay.
Between the political capital and dividend is an important requirement — opportunity. This Budget has provided the space for opportunity, mindful of the security and longevity of the political capital. The 2015 Budget marks the construction of the optimistic bridge between capital and dividend which can be done only with a “fix and grow” model and not with a “hit and run” model. The solidity and sustainability of the bridge lies in its execution and implementation. Let the bridge building process begin for India. Kudos to the FM for the bhoomi puja!
The writer is dean (planning and development) of SASTRA University and can be reached at vaidhya@sastra.edu