Reframing of India’s economic road map
The 2022-23 Budget, besides boldly doing what no one had imagined it could in the backdrop of elections, is full of components that favour big leaps in place of incrementalism
Terms like big bang reforms, paradigm shift and transformational are so overused to describe what some policy decisions are — or aren’t — that readers and watchers of news may be forgiven for taking them with a pinch of salt. But finance minister (FM) Nirmala Sitharaman’s presentation of the Narendra Modi government’s eighth full Budget on February 1 was one of those occasions when such adjectives are justified.
There have been few such occasions in India since the 1991 Budget presented by the PV Narasimha Rao government’s FM, Manmohan Singh. The duo could not manage it again during the rest of their tenure, and neither could any of the FMs in the decade under Prime Minister (PM) Manmohan Singh.
PM Atal Bihari Vajpayee’s launch of the Golden Quadrilateral Highway Project and the Pradhan Mantri Gram Sadak Yojana for asphalt roads in villages certainly qualified. These were a seminal shift away from populist handouts to investing in infrastructure. However, the Modi era has seen several such instances, such as the introduction of the Goods and Services Tax, the Insolvency and Bankruptcy Code, a big uptick in infrastructure spending, and an array of policy decisions during the coronavirus pandemic.
Yet, despite that track record, it is no exaggeration to say that this Budget does indeed set a new standard of bold, visionary reframing of India’s economic road map. Let alone the many specific components of the Budget that contribute to this characterisation, the fact of the context in which it happened is stunning to say the least.
With election campaigning underway in five states, including the hugely significant Uttar Pradesh, not one Budget commentator predicted the steely resistance of populist pressures, and courageous commitment to India’s long-term well-being. It must have taken nerves of steel, and confidence about the wisdom of voters who have repeatedly reposed faith in PM Modi’s zeal for a better India.
This aspect alone, of doing the right thing, resisting populist pressures, investing in improving the living standards of all Indians, ought to earn this Budget the rarest of plaudits. There was a foretaste of this in an earlier Modi government Budget too, when in 2017, the separate Railway Budget presentation was done away with.
The Railway Budget presentation had become an annual high point of political grandstanding, especially by regional party leaders who were part of national coalition governments. Very few of those spectacles had much to do with national priorities in transport infrastructure. They were all about catering to local vote-banks and, that too, usually only in name, since the spread of small allocations to a vast number of politically favoured projects meant that few got completed even over decades.
One of the main sources of populist pressures on any Indian government is the incessant cycle of elections. No other democracy has elections as often as India. Some like the United States have theirs bunched around two cycles in a four-year period, leaving a reasonable modicum of time for elected officials to focus on governance, before having to return to campaigning again.
India’s non-stop election cycles impose the lowest ratio of governance-to-campaigning among all democratic nations. This not only impacts those in government, but also those in Opposition, by systemically incentivising them to oppose policy decisions continually, in the hope of benefiting in the next election just a few months away.
One of the PM’s most cherished aims is to streamline elections, as they used to be at the start of the Republic, before central interference, lack of majorities and other issues led to many different state election cycles for more than half-a-century now. While the effort to bring about one nation, one election is still a work in progress, the decision to budget for national priorities as if elections were not happening simultaneously, is breathtaking in its audacity.
The Budget itself, besides this stunning subtext of boldly doing what no one had imagined it could in the backdrop of elections, is full of components that favour big leaps in place of incrementalism. No doubt the pandemic came in the way of India’s tryst with a $5-trillion economy, but this Budget signals a solid determination to prove that apart from a slight delay, that treasured dream is back on track.
That the markets have responded enthusiastically to the Budget is no surprise. Equally important, almost all non-political commentators have also reacted positively. This is significant, because there have been several instances in recent years when a few ostensibly neutral experts have allowed themselves to be influenced by a sustained anti-Modi narrative, so much so as to even question decisions which they themselves had been advocating.
Over the past few years, India has decidedly become one of the most favoured global investment destinations. This has not happened on autopilot. It has come about through determined overturning of the earlier policy paralysis, pushing through long-pending economic reforms and adroit positioning in the changing geopolitical scenario, especially in relation to China.
India has once again clocked in as the fastest growing large economy, and all indications are that this is likely to sustain in the near future.