Budget report card

Good on legislative reforms, patchy on execution

Last year’s Union Budget was hailed for its commitment to fiscal prudence, especially as the finance minister had to sew a Budget around the recommendations of the 14th Finance Commission, which allocated a significantly higher proportion of resources to the states. But the Budget also marked a clear shift in the Narendra Modi-led government’s priorities — bijli, sadak, cooking gas and rural housing received much attention. It was clear that the government was lining itself up for the elections in 2019 and focussing on welfare schemes that most affected the poor, as against the so-called neo-middle class. The implementation of the key Budget promises shows a clear trend. Barring a few exceptions, the government has performed better when it came to the promises that required legislative changes as against those that required changes on the ground, where the central government had to coordinate and work with the states. This is true despite the overwhelming sense that legislative work has suffered immensely due to parliamentary logjams — for instance, the winter session was the worst performing session in the past six years.

Still, Finance Minister Arun Jaitley would be able to look back at the past year with some satisfaction when it comes to the proposals he announced as part of financial sector reforms. Crucially, Parliament passed the Insolvency and Bankruptcy Code, which seeks to improve the ease of exiting a business, in May 2016. The government also passed the promised Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill. Similarly, at long last, India managed to pass the constitutional amendment to enable the transition to a goods and services tax regime. And just a few days ago, the Cabinet Committee on Economic Affairs gave the go-ahead for the listing of shares of five general insurance companies. The other big achievement was the amendments in the Reserve Bank of India Act to usher in a new monetary policy framework where a committee, with the representation of government nominees and the central bank, undertakes the monetary policy review. There have been other areas that only saw little movement, for instance, there is still no road map for the consolidation of public sector banks. But, overall there are several changes that will improve the ease of doing business and boost growth.

However, the success with promises on the social and rural sectors or even the infrastructure sector has been rather patchy. There were some standout successes such as the Pradhan Mantri Ujjwala Yojana, which provides LPG connections to poor women. It has already exceeded its target of 15 million households. Similarly, there has been considerable success towards achieving the target of the soil health card scheme as well as the scheme to increase the area under organic farming. Yet, for the most part, the achievements have lagged behind — nowhere more so than in the Pradhan Mantri Awas Yojana. For instance, as against a target of 3.2 million rural houses, only 76 have been constructed. A health insurance scheme with a cover up to Rs 1 lakh is yet to be launched. The road construction programme, which received the most generous outlay in the last Budget, too, lags far behind the target. Several other changes proposed to boost investment in the infrastructure sector have not yet been introduced. With the economic recovery being halted by demonetisation, it is of critical importance that the next Budget makes up for the slack in the on-field implementation of various schemes. Better coordination between the Centre and the states, notwithstanding the state elections and their results, would do India well.