5 July 2019
Budget 2019-20 is an insipid Budget.
The Finance Minister’s speech was an unusually opaque exercise. I ask all of you gathered here: Has there ever been a Budget speech that does not disclose the total revenue, the total expenditure, the fiscal deficit, the revenue deficit, the additional revenue mobilization or the financial concessions? Has there ever been a Budget speech that does not disclose the allocations to important programmes like MGNREGA, Mid-day Meal Scheme, Healthcare etc. and to vulnerable sections like SC, ST, Minorities, Women etc.? We are shocked by this departure from the usual practice.
Belying widespread expectations, the FM has given no meaningful relief to any section of the people. On the contrary the FM has increased customs duties on a large number of goods (protectionist), raised taxes on petrol and diesel (exploitative) and proposed extensive amendments to the Income Tax Act that will increase the tax and compliance burdens on the taxpayer.
The Budget speech had the usual Part A and Part B. It has been the most disappointing Part A in recent years. We cannot recall Part A of the Budget Speech that was so totally bereft of any reform, not to speak of structural reforms. The most disappointed person must be the Chief Economic Adviser. The CEA had set the goal for India to become a USD 5 trillion economy and premised his entire argument on boosting private investment. There was no indication in the Budget speech of any measures to attract greater private investment.
The only investment related proposal was to increase the FPI limit from 24 per cent to the sectoral limit (pertaining to the industry) if the investee company opts for the higher limit. We may point out that FPI is not FDI, and we are sure thus is is not the private investment that the CEA had in mind!
In Part A, the FM took about 60 minutes to unveil her programmes which turned out to be mostly expansion of current programmes and schemes — more rural roads, more electricity connections, more LPG connections, more toilets, more LED bulbs, more homes for the poor, more clusters for rural industries and so on. She also assumed more responsibility for the central government for school education and college education The Modi government treats India as one big state government and has taken upon itself the responsibility to do things that are the right and duty of state governments. This is not cooperative federalism, it is an unequal partnership imposed by the Centre upon state governments.
Apparently, the Prime Minister believes that only he and his government can deliver basic public goods and services to the people. We disagree; we think that states have the capacity to deliver public goods and services and it is not correct to reduce state governments to mere local administrations. Another grave infirmity in this approach is that the Modi government refuses to measure outcomes, refuses to take note of field reports and refuses to correct the exaggerated claims of success.
If we can pick any ideas in the Budget speech that were interesting, it was the idea of a Credit Guarantee Enhancement Corporation and the idea of a nationwide Gas grid and Water grid. But there are no details whatsoever and hence we cannot offer any comment.
Altogether, the Budget has been prepared without listening to the voices of either ordinary citizens or knowledgeable economists. The Budget has also belied the modest expectations raised yesterday by the Economic Survey.