I liked how someone on Twitter described Mr Arun Jaitley’s budget speech. It said that for the first one hour he was the socialist politician and the next 40 minutes he was the lawyer accountant. Well it pretty much describes what the budget was all about as well. Decidedly this Budget had predominantly populist elements but also is replete with innumerable details that aim to strengthen the overall fiscal and economic state of the country.
Perhaps the biggest takeaway has been that the fiscal deficit is still stuck at 3.9% of the GDP for this financial year and is likely to go down to 3.5% of the GDP by the next fiscal. While at the very grassroot level, you might think how does it matter, let me reiterate it does. It essentially means that the Govt is steadfast in its path of fiscal consolidation and is not letting votebank politics tinker with fiscal prudence. Additionally any deviation from this route would only mean more problems for India. Be it global investors or international credit rating agencies or anyone who believes in the India story, any measure that would lead to the fiscal deficit broadening would have been a major thumbs down.
Perhaps now the RBI too gets sufficient ammunition to plan a rate cut in weeks and months to come. Not just that, the overall focus of the Budget continues to be on strengthening the economy and boost job creation at all levels. The Govt has set a target of doubling farm income by 2022 and make farmers more self sufficient with creation of a National Agriculture Market. Improving road infrastructure is another key focus area. The Budget has set a target of 2019 for ensuring full connectivity and are looking at achieving 30 kms/day of highway construction this year.
The fact that the Govt is still talking about GST essentially means that the Govt has not completely given up on it and hopes to get the legislation in place eventually. However the Govt making fresh moves towards taxing the rich and bringing in new cess for retail investors along with bank recapitalisation continue to be the thorny issues in the Budget. The taxation paradigm also is wrought in complexities. From the individual tax payer’s perspective, there isn’t much but corporate taxes have gotten further complex. All in all it won’t be wrong to say that this Budget has reiterated the focus on prompt legislation and urgent need for reforms.