There are no good finance ministers, only lucky ones. Unarguably, Nirmala Sitharaman has been the unluckiest. After “boring and disappointing” budgets, she has boned up on the task and delivered a sensible, growth-oriented budget prioritising investments over fiscal consolidation, a stable tax regime, and spring-cleaning stressed assets and government’s books.
The Covid pandemic toppled the arithmetic alchemy in FY21, where expenses and debt rose and income fell. Fiscal deficit will breach past 9.5% largely due to the food subsidy bill, for which government cut a Rs 1.5 lakh crore cheque. With this, the UPA-era off-budget financing gets a quiet burial, the nation’s balance sheet reflects reality and the government wins investors’ trust for transparency and deficit realism.
In FY22, expenditure at Rs 34.83 lakh crore is barely Rs 33,000 crore over FY21 — the lowest ever increase in decades. But what sets this budget apart is the quality of expenditure. As Sitharaman tried balancing between thrift and spendthrift, revenue expenditure is tipped for the chop, while capex will jump 34% at Rs 5.54 lakh crore — just what’s needed for job creation and growth recovery.
Fiscal deficit will reduce to 6.8% of GDP from 9.5% in FY21, not because tax revenue will be back to its best behaviour, but because of expenditure rationalisation from 17.7% to 15.6% of GDP. Perhaps, the FM hopes in private, that revenue collections will be better than projections.Among sectors, healthcare will get rolls of crisp currency notes aggregating Rs 2.38 lakh crore, but since this includes water and sanitation allocations, Sitharaman’s sincere efforts couldn’t win either the expert or the ordinary.
Agriculture credit has been raised to Rs 16.5 lakh crore and so are allocations for defence -- somewhat marginal despite the China threat — education and others. However, there was a marked absence of targeted support for distressed housheolds, who for now must survive largely on love. And as if poking on the ribs, interest earned on annual PF contribution exceeding Rs 2.5 lakh is taxable from April. Once taxation begins, it only goes upwards.
Additionally, a farm cess on a few items aims to raise Rs 30,000 crore, or 0.1% of GDP. As for banks, there’s a sniper in the woods (bad loans) so government will set up a bad bank at last.Infrastructure got more than one gold vein to pump the heart of the economy. The proposed Development Financial Institution is a good egg though investing in Indian infra has historically been considered risky. The asset monetisation drive will see almost everything that’s saleable at PSUs hanging a for-sale sign. They can rake in the dough only if buyers don’t jockey for bargains.Perhaps FY2022 will be a year of privatisation starting with two state-run banks and an insurer. We already have a few jilted brides in LIC, BPCL and Air India and disinvestment proceeds have always been the bridesmaid. So, strategic sale of PSUs will rest not on government’s willingness but its resolve to amend laws.
In all, the Budget’s spirit is willing, but the flesh is weak with Sitharaman playing schwäbische Hausfrau — southern Germany’s pragmatic Swabian housewife — to guard the nation’s finances. The FM should have used the decade’s first budget setting a definitive agenda for the future and not just the next 12 months. India will be the world’s fastest growing economy. At this moment, we’ve only got one chance and Sitharaman could have displayed a seat-of-the-pants ability to regain our rightful place in the sun.
WATCH | Expert Take | 'The budget lacks in confidence, we are under-investing'