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Making sense of an "intellectually honest" Budget

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Sandip Ghose
Sandip GhoseMar 01, 2015 | 14:48

Making sense of an "intellectually honest" Budget

To me, the penultimate line of Arun Jaitley’s speech sums up the Budget – it was an “intellectually honest” exercise.  If there was criticism last year against the finance minister for waffling a bit – he more than made up for it this year with remarkable clarity of vision and priorities. Equally refreshing was the candidness in acknowledging the issues and challenges facing the government. Though some may still be disappointed by the lack of the proverbial “big-bang” – the Budget was distinctive in its pragmatic realism. Clearly a sharp lawyer’s mind was at work in tandem with the best economic brains.

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Recognising that agricultural and rural income were under stress – shows the Modi government not only has its finger on the pulse but also its heart at the right place – notwithstanding what its detractors might allege. Therefore, upping the MNREGA outlay (to highest ever levels) and increasing budgetary allocation for rural infrastructure – road, electricity and irrigation couldn’t have been more timely and takes the wind out of the “so-called” farmer friendly parties’ sails.

Similarly, the insurance (life and accident) and pension schemes are innovative and practical steps towards creating a meaningful and effective security net for the underprivileged.  

It is also very astute of Jaitley to realise that investment in infrastructure cannot be kick-started depending on PPP projects alone. The government will have to take the lead and front-end expenditure - also underwrite part of the project risk – to restore confidence and interest partners. Therefore, introduction of the “road-cess” out of the oil pool to fund highways is a very smart move.

While the middle-class are allowed their routine crib for no significant alterations in tax exemptions (barring raising the Mediclaim limits), there is nothing overtly inflationary about the Budget. The corporates should welcome assurance of a predictable (and “non-confrontational”) tax-regime and, to my mind, it’s fair-game that reduction in corporate tax rate has been deferred just as the withdrawal of special tax benefits.

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The prime minister hailing from a western state has shown greater interest in “mainstreaming” the Northeast than the previous incumbent who was an MP from Assam. Special packages for West Bengal, Bihar, Andhra and Telengana should not only help in more balanced development but also contain migration from the economically backward regions.

The announcements made towards controlling black-money, undisclosed or concealed off-shore assets – may not yield miraculous results overnight – but it clearly signals the lowered tolerance threshold that will make people wary of stashing wealth abroad.

Hopefully – the rural thrust and introduction of social welfare schemes will take some of the sting out of the push back on the Land Acquisition Bill to enable the government to get land for building roads and infrastructure. Parallely, increased share of resources to the states (both in budgetary allocation and proceeds of coal and other mine auctions) will get ploughed back towards development expenditure providing further impetus to growth.

Media billed this as the “make or break” Budget for Modi. As Jaitley pointed out – “making” is a 24/7 365 day activity and only time will tell how much of the intent gets actually converted into reality. But, “break” it certainly didn’t.  Now, if the Reserve Bank plays ball and the opposition is not beset with "vinaash kale viparit buddhi” syndrome – we have good reasons to be optimistic about the future – even if we take the Economic Survey with a large dollop of salt.

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Last updated: March 01, 2015 | 14:48
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