Budget 2020 is indeed a 'bold' Budget; you cannot fault Sitharaman here

If doing away with tax exemptions is not 'bold', what is? It has annoyed savers which is as good a definition of 'bold' as you will ever get. Structural reform is like that only

Nirmala Sitharaman’s second Budget has produced the usual grumble that it’s not ‘bold’. But hard as I have tried, I have not been able to find out exactly what ‘bold’ means in this context.
 
The usual point of reference is the 1991 Budget. But when I read it again, there was nothing ‘bold’ about it. In fact, 90 per cent of it was the opposite of bold and extremely deflationary.
 
The only ‘bold’ Budget, if you restrict yourself to tax rates, was the 1997 one when P Chidambaram sharply reduced income-tax rates for everyone.
 

Before that there was the 1985 Budget of V P Singh that did the same thing in a smaller measure. But guess what one of my gurus, Swaminathan Aiyar, had called it then: a tandoori chop-suey Budget! Neither fish nor fowl.

 
But if tax cuts are to be the measure, that is what Ms Sitharaman has done with corporation tax — though well before the Budget — and now with personal income taxes. So why blame her for not being bold?
 
Indeed, what is it but bold to do away with tax exemptions which is what she is offering? It has annoyed savers which, in my book, is as good a definition of ‘bold’ as you will ever get. Structural reform is like that only.
 
Also, here’s the hard fact: the economy didn’t revive in 1997 despite the deep cuts in income-tax rates. In fact, it would not revive for another seven years.

 
And when it did, it was not because of any Budget. It was because the George Bush administration in the US decided to take kindly to India. That, more than anything that we did via Budgets, changed the mood.
 
There were two other factors that helped with the revival. In that sense the United Progressive Alliance (UPA) was smarter. The first was fiscal: the UPA government started giving away money, both from taxes and from banks. Whether it was subsidies or loan waivers, the effect was the same. The government was blowing air into a deflated economy.
 

The problem of course was that it didn’t know when to stop. As a result it bankrupted the fisc and banks both by 2013. India came to be counted among very fragile economies.
 
The second was Y V Reddy. As Reserve Bank of India (RBI) governor he managed the banking system so deftly that despite the giveaways, by the time he left in 2008, the banks were all fully capitalised. By 2011, they had been destroyed.
 
The Modi Budgets
 
If there is one thing that characterises the Narendra Modi government’s Budgets, it’s slow but steady structural reform. It has, for example, stopped giving away tax and bank money. That hurts. Believe me, that hurts.

 
The emphasis has been slow and structural. The slowness has drawn severe criticism and the structural is hurting the economy because it is structural.
 
The slowness has been because of many reasons, not the least of which is Mr Modi’s preference for it. He knows that a Big Bang Budget in the Indian context runs the risk of being labelled a suit-boot Budget.
 
But on structural reform you can’t fault him. He has gone about altering the incentives structure systematically and the results will begin to show in a couple of years.
 
One final point about the 2020 Budget. Mr Modi has given up the pump-priming methods and also his dread of being seen as pro-rich. That’s why even the Congress party hasn’t uttered a word about that.

 
If you ask me, that’s the best measure of success of this Budget. It signifies intent and determination to undo the legacies of Congress socialism.