The trouble with Arun Jaitley’s maiden budget is that he tried to play Santa Claus and give something to everybody. In the process, he did not satisfy most people with his limited bounties. The finance minister should have avoided spending on building tall statues, beautification of river ghats, and been less concerned about spiritual uplift, war memorials and the size of TV screens. Instead, he could have been more selective at least in his speech and kept his focus on certain specific targets. His speech could have been shorter, without exhausting him, the way it apparently did.
No one could have expected Himalayan feats from Jaitley in his first budget. After all, it had to be appreciated, here was the first time a finance minister was presenting his maiden budget in the space of just about six weeks. He has inherited a none too enviable fiscal situation. P Chidambaram, the veteran that he had become, craftily transferred many of the expenses on to the next government presenting an artificially rosy picture of government finances. The economy had seriously slowed down. The scope for stimulus was virtually non-existent. All the woes were graphically depicted in the Economic Survey released the day before. At best, the present finance minister could do a holding operation.
But then Jaitley, it has to be admitted, attempted something more. He has accepted the interim budget’s broad framework. He has accepted the interim budget’s gross tax revenue figure and worked out his expenditure accordingly. He has not immediately taken any view on the ballooning subsidy bill which needs to be pruned. He has constituted a high level Expenditure Management Commission which will review all expenditure, including subsidies. A decision on subsidies might be politically more prudent and timely only after the next round of state elections. If he is successful in slashing expenses and targeting subsidies more effectively that will be a lasting contribution. For that one has to wait till the next budget.
Secondly, even within the limited fiscal space, Jaitley has given direct tax concessions to the tune of Rs22,200 crore which will immediately raise disposable income for mostly the small household taxpayers. Jaitley has done this while taking note of the rapid fall in household sector savings in the economy and consequently investment.
Thirdly, Jaitley has articulated his intentions about simplifying and rationalising the tax regime, giving it some predictability and stability. This is important, particularly in the light of huge negative impact tax-related controversies (the Vodafone case, to cite) had recently generated. The minister has cleared the air that fresh retrospective tax demands would not be raised. Secondly, Jaitley had allowed advance tax ruling for resident Indians as well, which was allowed for foreigners till now. Thirdly, he has also clarified a number of tricky issues over transfer pricing by multinational companies. This last aspect has big implications, especially when India is getting increasingly integrated with the global economy and production is becoming trans-border.
But then, there are some areas where Jaitley deserves unqualified admiration and support. He has courageously discontinued the practice of long quotations from poets and philosophers for the purposes of embellishing mundane budgets statements. That mostly did not help in the past. Especially when some of his predecessors’ budgets had become nightmares for the country. Jaitley’s justification for raising excise on pan masala is also worth a big hand. He argued that the decision was in the interest of maintaining “human and fiscal health”.