Budget 2016: Verbose, Robin Hood, muted, say economists about the Budget

"Verbose", "lacking in substance and boldness", "Robin Hood Budget", "muted"; these were the words used by economists to describe the Union Budget presented by finance minister Arun Jaitley on Monday.

Jaitley leaned to the left of the centre as he tried to keep the thrust of his Budget on farm, rural and social welfare sectors. "If I would have to use a term I would call it (Budget) a Robin Hood Budget. Tax the superrich and give a lot of dole-outs and support to the poor and the farmers. The primarily focus is to double the farm income (by 2022), so there is need to essentially support the farmers and the rural areas. So, I don't fault the government in (that)," said Ranen Banerjee, executive director, PwC India.

Dr DK Srivastava, chief policy adviser, EY India, however, does not see the government's math on rural income working out. He believes the National Democratic Alliance's (NDA) third budget was "mostly verbose, incremental and lacking in substance and boldness".

"Mostly it is words — schemes for rural and farm sectors. They have made a promise to double rural income by 2022 without laying foundation for that. Such a growth would involve a 14% yield growth in next 5-6 years and agriculture grows at an average growth rate of 1-1.5%. So, these are only tall promises," he said.

Srivastava said even though Jaitley has stuck to fiscal prudence by maintaining the fiscal deficit target of 3.5% for the next fiscal to maintain "credibility", the fact that it was based on "artificial assumptions" could result in loss of credibility.

"The assumptions of the nominal GDP growth are questionable because they have assumed a 4% inflation and real GDP growth rate of 7%. As long as the WPI (wholesale Price Index) remains in the negative zone and there is a continuous effort to reduce CPI (Consumer Price Index). There is no way they can get a 4% inflation in GDP growth," he said.

The EY's policy adviser feels the assumptions on which tax revenue growth is based are very optimistic. This is because he does not expect the government to reap the benefit of oil crude prices that resulted in a very high growth in the union excise duties in the current fiscal.

"This (gains from falling crude oil prices) is not something that can be repeated next year (FY17). In fact, there will be a sharp fall," he said.

Tax revenue growth rate in the current was 17% and the target for the next year has been lowered to 11%. Last year, the finance ministry, during its mid-year review of the economic survey, reduced its nominal GDP growth target of 11.5% to 8.6%.

"Based on certain assumptions, the fiscal deficit number adheres to the fiscal consolidation path for credibility, but credibility (will be) lost if the numbers are based on artificial assumptions," he said.

According Dr Srivastava, Jaitley's Budget was a "missed opportunity". "It is a missed opportunity, in the sense, that in terms of political cycle of the NDA government, the third Budget should have been the boldest but it's very incremental in nature," he criticised.

He did not expect the Budget to stimulate growth as there was no "meaningful" push from the consumption or the investment side.

Anis Chakravarty, partner and lead economist, Deloitte India, termed the Budget as "muted". "I term the Budget to be muted. There is significant focus on agriculture, rural and social welfare, leaving less space in it for manufacturing and SMEs (small and medium enterprise). I would have like to see a little bit more on the initiatives which were kick-started last year; in terms of their progress and moves, such as industrial corridor and Smart Cities," he said.

Chakravarty commended the government on meeting the fiscal deficit target and overachieving the revenue deficit target. He said the move to set up a committee to look at a band of fiscal deficit target for FY18 would give the government more flexibility rather than being tied to a single target number.

PwC's Banerjee said with the finance minister having taking the stand to stick to the fiscal discipline path, he did not "have much of headroom for doing any adventurous thing".

He said the government has cut down some of its expenditure this year by postponing implementing salary hikes of government employees recommended by the seventh pay commission and allocating lower amount for bank recapitalisation than expected.

"He (Jaitley) mentioned that a committee was looking into the (seventh pay commission) recommendations. I don't know whether that was a hint at either having a lower than recommended (pay) hike or delay in its implementation. That has given him (Jaitley) some window to address the fiscal concern," said Banerjee.

On bank recapitalisation coming at Rs25,000 crore as against the expected Rs65,000-70,000 crore, he said the Ujwal DISCOM Assurance Yojana (UDAY) scheme, which will see 75% of the debt of the power utilities taken over by state government in lieu of issuing bonds to the banks and financial institutions (FIs), could effectively trim the non-performing assets (NPAs) of banks.

"The requirement of bank recapitalisation may go down because of the Uday scheme," he said.