At a small gathering a few days before the finance minister’s Budget
2018-19 speech, I commented on my expectations for the Budget.
And I was proved wrong on most counts.
It would have been quite difficult to meet the deficit targets, but the finance minister would keep to them, I predicted. Wrong.
Some new direction on social security would be seen, but little by way of allocations. Partially wrong.
would attempt at simplification and some deductions would be reduced. Grossly wrong.
We would see significant movement towards simplification of the tax structure. With the qualifier of not having seen the fine print, I was wrong on this one too.
The government would not increase import duties; wrong again.
Agriculture would be a major beneficiary of the very limited leeway the government had on resource allocation. Partially wrong.
Though the government would want to, it would not be able to increase allocations to infrastructure due to legal hurdles and bandwidth. Wrong again.
It would attempt to strengthen its implementation abilities for the future. See little on that front too. It would not expand insurance schemes. Missed the mark there as well.
I admit I was right on some elements, and that is in the broad direction. Improved infrastructure, greater focus on agriculture, on education, health care, housing, and access to housing and energy by households being some key elements.
We will continue to see greater emphasis on these in the years to come. There is little on the economic vision side with which anyone would disagree.
However, there is a pro-inflationary element in this Budget
and it will be abetted by the expected rise in global energy prices. Keeping the fiscal targets could have to some extend neutralised this force, but that is not to be. Some nimble macro-management would now be required to keep interest rates stable over the next few quarters.
But the biggest problem of the government, as the last five years have shown, is difficulty in implementation of its ambitious objectives and game-changing innovations. The administration at the local, state and even central government level has been weakened over the last few decades and not able to complete the task at hand well enough. The government would, at some point, need to allocate funds and efforts expressly towards a faster and more nimble administration. It has not done much on it in this Budget, but would need to in the future.
Admittedly judging a government on the basis of its Budget
proposals is not wise. And each government must eventually decide based on its political imperatives. But this Budget
while laying out many visionary elements — housing, energy, financial inclusion, and even environment — has not explicitly been able to lay out how it would be able implement its vision. It is the how that worries and should worry those in the government as well.
On the other hand, implementation and administration are not necessarily Budget-related items and one cannot really expect the finance minister to provide a direction on that issue. Nevertheless, administrative and local government reforms are becoming extremely crucial if schemes such as Swachh Bharat, Ujjwala or Saubhagya are to be sustained and grown upon.
Finally, the Budget
is only marginally populist, but not economically conservative either, and it is not the Budget
that lays out the blueprint for a new India. Let us wait for 2019.
The writer heads Indicus Foundation.