Budget 2016: FM Arun Jaitley needs a better speech writer: Sanjaya Baru

Finance Minister Arun Jaitley’s annual financial and economic policy statement to Parliament was given prime ministerial imprimatur when Prime Minister Narendra Modi told high school children on his radio show on Sunday that he too, like them, was getting prepared for an examination on Monday and hoped to do well.

Modi’s decision to take ownership of the Union Budget should silence Jaitley’s critics within his own party.

The nine pillars of the Modi-Jaitley macroeconomic strategy provide adequate basis for ensuring that India remains the world’s fastest growing large economy during the current fiscal, and hopefully beyond. The politics of the Budget speech is all too visible to require too much analysis.

The overt focus on the rural economy and farmer’s welfare responds to concerns about an agrarian crisis and rural distress.

The focus on roads, railways, housing and infrastructure addresses concerns the need to boost public investment in infrastructure.

The focus on health, education and the social sectors, including the promotion of dalit enterprise, responds to concerns about the ruling party not doing enough on these fronts. Finally, the focus on ease of doing business, financial sector and tax reforms, public-private partnership initiatives and so on takes head on long-pending issues worrying Indian business. In the run-up to Budget Day, the fiscal deficit number was in the eye of an ideological storm. Conservative monetarists warned the finance minister that any deviation from the road map defined by the Fiscal Responsibility and Budget Management (FRBM) Act would be disastrous.

Liberal economists, on the other hand, suggested this was making much of a fiscal muchness. The debate, partly engineered by the government itself, was so shrill that it found an echo even in the chief economic advisor’s annual economic survey. How did the finance minister respond? Cleverly. Remember ‘Aswathama hatha [kunjara]’ (‘Aswathama [the elephant] is dead’) from the Mahabharata? The headline read loud. The punch line, spoken softly. Jaitley and his team happily claimed credit for their fiscal rectitude this year, but the finance minister had a rider. The time has come, he claimed, for a review of the FRBM Act.

On fiscal policy, the budgetary strategy has attracted two criticisms. First, that it is not progressive. More revenue has been garnered via indirect taxes while the revenue give-away has been in direct taxes. While the beneficiaries of the latter will mainly be salaried employees and self-employed entrepreneurs, it is immediately difficult to comprehend who is likely to bear the burden of the `20,670 crore additional revenue raised through indirect taxes.

The second criticism has been about the decision to levy a second central cess – now for Krishi Kalyan, following Swachh Bharat. However, this trend towards imposition of a non-shareable (with states) impost seems to be the direct consequence of the Modi government’s decision to fully implement the recommendations of the Fourteenth Finance Commission (FFC) increasing the states’ share of total shareable revenues.

Jaitley presented a fiscally responsible Budget and a forward-looking and politically balanced economic policy statement. But, for the second year in a row, his avoidably long speech was neither crafted for live television nor did it invite much applause in the Lok Sabha.

Clearly, Jaitley needs a better speechwriter even if not better policy advisors