Finance minister Arun Jaitley sprang a surprise on Wednesday by presenting a budget that avoided populism in a poll season and laid thrust on cushioning the economy from the disruptive impact of demonetisation. (WATCH FULL BUDGET SPEECH | READ JAITLEY’S FULL BUDGET SPEECH)
The opposition parties predictably saw no vision in the budget but what drew their grudging support was Jaitley’s push for transparency in political funding — he proposed to bring down anonymous cash donation from Rs 20,000 to Rs 2,000 per source and to amend the law to introduce electoral bonds that could be bought by donors from banks and redeemed in parties’ accounts.
Given the BJP’s electoral sweepstakes in five poll-bound states — including Uttar Pradesh that sent 71 party MPs to the Lok Sabha in 2014 — there was speculation and anticipation of a please-all budget.
Even ruling party leaders had expected Jaitley to splurge on freebies to different sections of people in a year that could put Prime Minister Narendra Modi’s popularity to test in the five states in February-March and in Gujarat and Himachal Pradesh which go to the polls by the year-end.
But the finance minister didn’t waver. A shift to populism wouldn’t have served the PM’s development agenda and image.
Jaitley did make a pro-poor and pro-farmer pitch but didn’t offer any doles. He wooed the middle class by lowering the tax rate from 10% to 5% for those with an annual earning between Rs 2.5 lakh-Rs 5 lakh and by his thrust on affordable housing.
But the focus of the budget remained on reviving the economy through higher allocations in rural, agricultural and allied sectors. There was an attempt to make up for the drying up of private investment by injecting public contribution with increased allocations in infrastructure sectors.
The opposition parties were building pressure on the government to waive farm loans. The BJP even put the issue on its manifesto in UP. Many ruling party MPs HT spoke to on Tuesday wanted big sops—and even cash benefits-- for people.
Jaitley opted for prudence and stuck to the fiscal consolidation path even while increasing allocations in social sector. If he were to opt for populism now, the BJP would pay its political cost later.
Affiliates of the Rashtriya Swayamsevak Sangh (RSS) were not impressed. Its labour wing, the Bharatiya Mazdoor Sangh, for instance, criticised the budget for not using what it called the monetary gains from demonetisation on social spending.
Not that there was no politics in this budget. There can’t be one without it because budgets reflect the priorities of the government and the ruling party.
In this case, the priorities were the farmers, for whom Jaitley offered, among others, agriculture credit worth Rs 10 lakh crore, the students who saw many reformist moves being initiated in the education sector, the unemployed youth who would benefit not only from the huge investment in infrastructure but also from a significant increase in allocation for skill development and entrepreneurship, and the Dalits for whose welfare there was a substantial increase in allocations. He promised to make 50,000 gram panchayats “poverty-free” by 2019.
These budgetary proposals did make good politics ahead of elections—Dalits constitute one-third of the population in poll-bound Punjab and one-fifth in UP--but they were good economics, too.
In his budget speech in 2015, Jaitley’s focus was growth and investment. He offered no sops. He boldly announced the reduction of corporate tax in a phased manner and the abolition of wealth tax. Although he stuck to his reforms agenda in Budget 2016-17, there was a conscious attempt to counter the allegations of the government being “pro-rich”. That explained the promise to double farmers’ income by 2022, LPG connections to women of poor households, et al.
If the finance minister used the words “farmers” and “rural” 19 times in his budget speech in 2015, he used them 54 times in 2016. In his Budget speech on Wednesday, he spoke these two words 40 times but also used “investment” and “growth” at least 44 times. These numbers might indicate what weighed on Jaitley’s mind.