Narendra Modi did his finance minister few favours by telegraphing his expectations a few months ago that the Union Budget would be “transformational”.
What Modi wants, he usually gets; so markets may have been looking for a Big Bang in Arun Jaitley’s first full budget.
This, there was not: a government struggling to get the Land Bill made into law has clearly realised that big reforms are going to be off-Budget exercises.
To the FM’s credit, he focused instead on a series of sensible measures that should light the fuse for strong growth in years ahead. There was little posturing, less pontification and no populism beyond extending the UPA’s rural jobs scheme – a gesture that makes the government look mature and gracious, two adjectives with which it has not always been associated in its first year.
Pushing back the deadline for getting to a fiscal deficit of 3% by a year is a luxury the government can afford, especially as it is being done to enable the infrastructure investments so key to pushing growth and generating jobs.
A phased cut in corporate tax over four years cheered markets, and should release funds for investment. Not distinguishing between foreign direct and foreign portfolio investments for purposes of calculating investment caps, and allowing offshore fund managers to work in India without the fund losing its status are all positive measures.
Other significant measures include a tough new law against black money concealed abroad, though it is a measure of the government’s obsession with Swiss accounts that Jaitley spent much more time on this than on outlining measures to fight domestic tax evasion.
A new bankruptcy law, long overdue, is also in the works. The General Anti-Avoidance Rules (GAAR) – a potential source of strife for companies -- have been pushed back by a couple of years, and thankfully, retrospective tax provisions have been shunned.
Wealth tax was neither here nor there, so it’s appropriate that it has, in effect, been replaced by a 2% surcharge on taxation for the rich.
There are no changes in income-tax slabs, which may disappoint some. But the bulk of the 250-point fall in the Sensex post Budget could probably be traced to the FM being measured against unrealistic expectations.