The finance minister read out the longest-ever budget speech. By the end of it she was too exhausted to even complete the speech. This pretty much explains the state of affairs.

Like a caged canary aspiring to fly in the blue sky, the finance minister very enthusiastically read out the vision for new modern India. However, after two hours of aspirational efforts, it was clear that she does not have enough strength to break the shackles and release herself. In the end, she was settled in the cage, totally exhausted and her wings ruffled.

The positive takeaway from the budget statement is that the aspirations are really high and the vision of new modern India is very clear. The government for the first time made an unambiguous admission that the way forward is a progressive socio-economic structure that is egalitarian but encourages and supports private enterprise. It is a major achievement to officially abandon the socialist legacy that focused on curbing demand rather than enhancing supply and hindered the seamless integration of the Indian economy in the global economy.

Positive takeaways

The following thoughts in budget speech indicate that some significant structural reforms could be implemented in the next few years. These reforms with stabilisation of the already implemented changes like GST, IBC and simplified corporate tax structure could help in propelling the growth to the desired level:

Private participation in LIC, railways, and public sector banks;

Corporate farming through long term leases to improve the productivity and profitability of the farm sector;

A comprehensive vision for integrated rural development;

Healthcare in PPP mode;

Admitting commercialisation needed in the education and training sector, and permitting FDI and ECBs; an admission that education in humanities stream is mostly unproductive; and allowing online degree courses;

The exploitation of idle farm and railway land for solar energy production;

Unleashing power sector to grow like the telecom sector did in past 15 years -- prepaid metering and portability of service provider;

Acknowledging the needs for modern businesses and society -- local data storage, investment in modern technologies likes analytics, machine learning, robotics, bio-informatics and Artificial Intelligence, ensuring high-quality standards; world-class logistics, etc.;

Focusing on the strengths of India -- iconic heritage centres; preparing teachers and healthcare workers for the global communities; preparing Indian universities for global students;

Increasing the age of marriage and motherhood for women.

Negative takeaways

The incongruence between the intent (Part 1) and action (Part 2) is the key negative in the budget. For example, consider the following:

The tax structure for individual taxpayers has been made more complicated, contrary to the promise of simplification.

It's the sixth straight budget that talks about eliminating tax terrorism. The finance ministers admit year after year that tax terrorism is a reality and it is hindering growth. So far there is little delivery on the promise of eliminating this undue harassment of taxpayers. Rather each new promise further erodes the credibility of the government.

The allocation of resources to critical sectors like health, education, rural development is not commensurate with the statement of intent made in the first part of the budget speech.

The reluctance to temporarily suspend FRBM application is perplexing. The resource constraint is too conspicuous. The benefits of additional spending on the reforms agenda are well defined. The benefits of violating FRBM targets, if the reform agenda as outlined in Economic Survey and Budget speech is religiously implemented, would outweigh the cost in the short term.

The economy wanted more money in consumers' hands. The method minister has chosen to discourage savings by opting for the new personal tax rate structure. This may not be the best way of promoting consumption.

The removal of dividend distribution tax shall result in materially higher taxation for the investors. This is contrary to the intent.

Overall ranking — 6/10

I would rate the budget 6 on a scale of 10 for one simple reason, viz., it is for the first time that the government has officially recognised the need to move away from the socialist charter adopted in 1950-1980 era. It has shown willingness to adopt successful global practices in the socio-economic matters.

However, implementing the agenda would be a challenge because it will require much wider political consensus and far greater resource mobilisation. The track record of the incumbent government on both these fronts so far has been quite poor.

Vijay Kumar Gaba explores the treasure you know as India, and shares his experiences and observations about social, economic and cultural events and conditions. He contributes his pennies to the society as Director, Equal India Foundation. The views are personal.

Read his columns here.

First Published:Feb 1, 2020 5:39 PM IST