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Afterthought on Modi Union Budget 2018: What Went Wrong But What Went Right

Founder and CEO, Transfin.
Feb 2, 2018 5:32 AM 2 min read
Editorial

By half past noon, it was all done. Marked by the speaker's sign-off, Finance Minister Arun Jaitley concluded his speech for the last full year Union Budget before General Elections 2019. Like most Budgets to date, it will perhaps be foolhardy to claim one has sufficiently digested all underlying nuances to announce a firm judgement.

 

The Government of India’s approach towards its revenues and spending mirrors the inherent complexity of the nation it presides. With the state still being a significant economic engine, every Budget ultimately translates into a balancing act to manage expectations of stakeholders across the broadest possible spectrum - the middle class, the farmer, the industry, the poor, the hungry, the sick, the ultra-rich, the saver etc.

 

Nevertheless, one must still attempt to distil key messages and garner a ‘view’...as life without one won’t be fun.

 

In my "Year End Chronicle of the Indian Economy 2017-18" I had pointed to two areas which require attention - agriculture, in terms of farmer livelihood and productivity; and private sector industry, in terms of investment, competitiveness and growth. I am happy to see the former become a priority, but equally underwhelmed by the light touch on the latter.

 

Enhancement of farmer credit, a higher threshold for Minimum Support Prices (MSP), and an ambitious commitment to fisheries, aquaculture, horticulture, animal husbandry as well as bamboo (why not!) are big positives. A national scheme to bring a primitive sense of universal healthcare is a bonus. No holds barred in expressing my sincere gratitude.

 

However the narrative on industry was lacklustre. The all too familiar chain of buzzwords i.e. ‘Make in India’, ‘Smart Cities’, ‘Startup India’ - schemes which have garnished standees at industry events but failed to mobilise real change were repeated. The sole relief on corporate taxes and the hope that additional import duties will energise manufacturing won't do. Wage relief is hardly the solution to the threat of rising unemployment. Moreover, most investment initiatives were an extension of existing public spends, not an efficient and permanent way to deploy capital.

 

I dismiss any anxiety on lack of relief on personal income taxes. I never expected it with a government on the wrong side of its fiscal target. Re-introduction of long term capital gains tax on equities did come as a surprise. With a limited retail invesment pool post RERA and demonetisation, I was frankly not expecting any roadblock in the realm of financial markets. The dismissive and condescending tone towards cryptocurrencies is indeed worrying and makes me want to go bearish on this new asset class, atleast in India.

 

I will not rate this Budget as pure populism since it chalks some thoughtful welfare-oriented plans and does not merely throw obvious pre-election sops. Education and healthcare hardly ever get a mention in this annual ritual, so I'm happy the announced schemes stand much beyond the usual meddling in IITs/IIMs or gleaming over statistics of annual vaccination drives. Tribal education, medical colleges, and universal healthcare are essential goals to aspire, with or without elections. The miss on private industry is disappointing and will test Indian economy's resilience in one form or the other.  

 

That being said, only time and details can determine whether these ‘views’ can translate to a judgement.