Bold Budget taps into the 'hope' factor

Finance Minister Nirmala Seetharaman delivered the pro-growth, ‘reset’ Budget India needed and expected, after the pandemic. The key words ‘investment’ (in health and infrastructure) and ‘asset monetisation’ resonated in a speech animated by the spirit of reforms.

The political component of the Budget speech was conspicuous, as the FM took the opportunity to present the government’s farmer-friendly face. Agricultural credit was expanded to Rs 16.5 lakh crore and an ‘agri infra cess’ introduced, with the objective of deepening public investment in post-harvest infrastructure.

The FM made it a point to dwell on the sharp increase in payouts to farmers as a result of higher support prices in recent years, as if to counter the impression created by leaders of the agitating farmers’ front, that only a statutory right to minimum support prices (MSP) could rescue the nation’s primary producers from penury.

The objective, clearly, is to reassure farmers that last year’s agricultural reforms have no bearing on the MSP system, which involves procurement by the Government at guaranteed prices. To drive home the point that it has no intention of dismantling the APMCs (the state governmentrun mandis), the FM announced that the agriculture infrastructure fund could be used for improving facilities at these mandis.

At the same time, another 1,000 mandis will be integrated into the eNAM (National Agriculture Market), one of Prime Minister Narendra Modi’s pet projects, the pan-India electronic trading portal which networks existing mandis and enables better price discovery for farmers. Interestingly, the FM dealt with the Food Corporation of India’s debt of Rs 3 lakh crore by discontinuing its food subsidy loan and making a budgetary provision instead.

Sops for states going to polls in April this year were expected and the FM did not disappoint. Tamil Nadu is set to be the biggest beneficiary, with an investment of Rs 1.03 lakh crore on 3,500 kms of national highways. Kerala gets Rs 65,000 crore worth of roads, while West Bengal gets Rs 25,000 crore and Assam Rs 34,000 crore.

The 137 per cent increase in spending on public health, including the setting up of new health centres and district-level integrated labs, as well as the Rs 35,000-crore Covid vaccination programme, elicited hurrahs from economists. As did the massive increase in spending on infrastructure, which is expected to stimulate demand.

As India Inc. cheered and the markets soared (to the best post-Budget gains in 20 years), the middle class swung between relief at being spared additional taxes and disappointment at having been overlooked yet again. The FM sought to soothe the pain of being denied even the tiniest tax break by promising a more friendly taxation system. But then, she had made the same promise a year ago.

The fact that the agri-infra cess will not impact the consumer, as basic customs duty on the relevant items has been lowered, is some small consolation. The FM consciously avoided imposing a ‘Covid cess’, given the impact of the pandemic on household budgets.

Mobilising resources in view of the massive capital expenditure planned is a billion-dollar question.

As India Inc. cheered and the markets soared (to the best postBudget gains in 20 years), the middle class swung between relief at being spared additional taxes and disappointment at having been overlooked yet again. The FM sought to soothe the pain of being denied even the tiniest tax break by promising a more friendly taxation system. But then, she had made the same promise a year ago.

The Budget sets an ambitious disinvestment target of Rs 1.75 lakh crore, all the more surprising because targets of previous years have not been met. Promising that the much-anticipated IPO of the Life Insurance Corporation (LIC) would see the light of day, the FM said two public sector banks and a general insurance company are on the block.

At the same time, a ‘National Monetising Pipeline’ will be set up, in order to attract brownfield investments, say in Railways and roads, and exploit idle assets (like land). The FM also proposed a dashboard for tracking the pipeline’s progress in real time, so as to reassure and attract investors.

In a speech with big numbers, she threw in another one: gross expenditure for the current year is pegged at Rs 34.5 lakh crore and the fiscal deficit at 9.5 per cent. Hardly surprising, considering that expenditure ballooned even as revenues slowed to a trickle. Anticipated market borrowings in the coming year are Rs 12 lakh crore.

The slow plodding towards ease-ofdoing business continues. Raising the FDI cap in insurance from 49 per cent to 74 per cent and permitting foreign ownership is applause-worthy, as is the easing of compliance requirements for companies and the promise of legal reforms.

All in all, it is a bold Budget that taps into the ‘hope’ factor, promising economic progress that could well go beyond the post-Covid recovery. Whether the implementation and execution of the Budget proposals will live up to that promise remains to be seen.

The writer is a senior journalist with 35 years of experience in working with major newspapers and magazines. She is now an independent writer and author.