What the Modi Govt has indicated is that transferring assets to the private sector is good for the country. It is also a more efficient way of managing national resources. Traces of this philosophy were evident in the Budgets of the Vajpayee Government and even in the Budget speeches of Arun Jaitley. But this is probably the first time the approach has been linked to a larger economic philosophy
The problem with Union Budgets is that they are calculated to leave a lot of people dissatisfied. The reason is simple: Governments have to exercise choices. Those at the helm of decision-making have to factor in what is possible and desirable and what those who voted it to power seek. The choices become even more daunting when economic growth has slowed down, not necessarily because sovereign decisions have been wrong, but because of global currents that are beyond the control of any single country.
In the case of Nirmala Sitharaman’s 2020 Budget, there was another complicating factor. Having won an emphatic mandate in 2019, not least on the strength of his record in governance, the Narendra Modi Government has been confronted with sustained hostility over the past two months based on the grave crime of having implemented things it promised in its election manifesto. The protests over the Citizenship (Amendment) Act isn’t really about any disquiet over granting Indian nationality to Hindus, Sikhs and Buddhists from across the Radcliffe Line. It is about the persistence of India’s Muslim community, in alliance with the Left and rag-tag liberals, to make themselves politically relevant and reclaim lost political ground. Given this background, it was near inevitable that whatever Budget the Finance Minister presented on Saturday morning would have been rubbished.
It is for economists and media pundits to decide the extent to which the Budget corresponded to the art of the possible. The Modi Government has broadly adhered to the norms of fiscal responsibility, despite pressure both from within and without to spend as if there is no tomorrow. A 0.5 per cent slippage from last year isn’t such a big deal given the slowdown that India confronted. The Government has also been remarkably successful in keeping inflation under check so much so that mehngai has disappeared from the post-Modi political lexicon. It is also the case that the Government’s delivery of its ambitious schemes has been far more targeted than the preceding Governments. This is partly because technology has been put to better use by the present Government and partly because private gratification does not feature among the Government’s priorities.
Where this Government was falling short of the expectations of its supporters — those who voted for change rather than mere stability — was in chalking out a blueprint of its approach to economics. This was understandable given the preoccupations of the first Modi Government in fixing the GST, chasing crooked politicians and businessmen and removing the cobwebs of over-regulation. The record on these counts was mixed but satisfactory.
What is significant about this year’s Budget speech was the clear elaboration of an economic philosophy. While conceding that quoting either Kalidasa or the Tamil Saint poet Aauvaiyar does not impress those more accustomed to being inspired by Nobel Prize winning economists or, at least Adam Smith and Ricardo, Sitharaman did succeed in getting a few basic ideas across.
First, the Budget has committed this Government to wealth creation and entrepreneurship. This is a departure from the notion of a benevolent state that was idealised by the Nehruvians. It implies that, hopefully, in future the tax policies will not be geared towards punishing those who accumulate wealth.
Secondly, the Government has in effect conceded and even acted on the assumption that economic growth can be fuelled if, instead of paying more taxes, people had either more money to spend on their families or even put away for a rainy day. The philosophy of lower taxes, hopefully, will come to stay for some time to come.
Thirdly, by identifying the prosperity of India in previous centuries to both the country’s manufactures and trade, the Government has underlined the importance of being a part of the global economy. This implies that Make in India is not a slogan for protectionism but an encouragement to greater competitiveness. Maybe Modi may have some problem explaining this to some members of his parivar for whom India is a byword for intellectual and material self-sufficiency, but this prudent interpretation of swadeshi as implying the essence of the Indian experience is welcome.
Finally, read with the Economic Survey that is quite explicit in its endorsement of private enterprise over state control, it is quite clear that the Modi Government has quite a different perception of what constitutes the ‘commanding height’ of India’s 21st century economy. The commitment to the privatisation of Air India was reaffirmed a few days before the Budget and Sitharaman broke new ground by endorsing schemes to open up railway passenger routes to private partnership and offering a slice of the LIC equity to the capital markets. Earlier Governments have divested because they needed to sell the family silver to pay the bills. What the Modi Government has indicated is that transferring assets to the private sector is good for the country. It is also a more efficient way of managing national resources. Traces of this philosophy were evident in the Budgets of the Atal Bihari Vajpayee Government and even in the Budget speeches of Arun Jaitley. But this is probably the first time the approach has been linked to a larger economic philosophy.
Whether philosophical clarity has also been accompanied by the simplification of personal taxes is for the accountants to judge. I hope it has.
