PM Modis paisa

July 22, 2014 Regionally, Indias economy is so big,

that what happens in India afects all of us in South sia! "n 10 July, #un
Jaitely, the $iniste# of %inance in &#ime $iniste# 'a#end#a $odis new
(o)e#nment, p#esented a new *udget! +,pectations we#e high! -he $umbai
stoc. ma#.et on /alal St#eet was up by a 0fth! hithe#to sha.y #upee had
steadied and consume#s, who had the money, seemed to be on a spending
splu#ge!
Jaitely in his p#e1*udget comments insisted that 0scal p#udence will p#e)ail
o)e# 2mindless spending and populism! lthough analysts felt that the
ta#get of sh#in.ing the *udget de0cit to 4!13, which Jaitely inhe#ited f#om
the fo#me# $iniste# of %inance 4hidamba#am, loo.ed )e#y di5cult to
sustain, in the e)ent Jaitely #etained this ta#get, albeit admitting that it will
be a tough call!
*efo#e the *udget, two months into the 0scal yea#, spending outst#ipped
#e)enue by an estimated 6 40 billion! If the cu##ent wea. and
unde#pe#fo#ming South 7est monsoon does not st#engthen in the cou#se of
this month, fa#me#s will be in di5culty and will #e8ui#e #elief! -he p#oblems
in I#a8 and Sy#ia, &alestine, (a9a and Is#ael a#e pushing up ene#gy costs,
which India impo#ts and dist#ibutes at a subsidy!
&$ $odi du#ing the election made humongous p#omises : analysts ha)e
desc#ibed them as 2$odis inf#ast#uctu#e ambitions! Roads, facto#ies, powe#
lines, high speed #ains and 100 new cities to be built to c#eate ;obs fo#
Indias aspi#ing young wo#. fo#ce! Jaitely is e,pected to b#ing about some
cont#ols on wasteful subsidies, which ha)e )e#y wea. system ta#geting <40
million Indians who ha)e been en#olled in a biomet#ic identity scheme
called adhaa#, which has p#o)ed, in limited e,pe#iments to be )e#y
efecti)e in cont#olling lea.ages in welfa#e payments!
-he#e we#e some fea#s that since this was sta#ted by the
fo#me# 4ong#ess (o)e#nment, spea#headed by 'andan
'ile.ani, fo#me#ly of the softwa#e giant Infosys, who
wo#.ed with the 4ong#ess (o)e#nment and late#
contested the election on the 4ong#ess tic.et, but lost,
would, in the South sia t#adition, be sc#apped! *ut
bette# sense seems to ha)e p#e)ailed!
*ut cutting subsidies is unpopula#, as the $odi
(o)e#nment disco)e#ed when they went ahead with an
inc#ease of #ailway fai#s, befo#e the p#esentation of the
Railway *udget which p#ecedes the national budget, and
had to #oll bac. some of the inc#eases due to
o)e#whelming opposition! It is i#onic that the inc#ease of
#ail fa#es had been a decision ta.en by the p#e)ious
4ong#ess go)e#nment, which the succeeding *J&
(o)e#nment implemented!
4onfusing #e)enue ta,es
nothe# )e,ing issue has been the confusing #e)enue
ta,es p#e)ailing! +ach state has its own ta,es, causing
confusion to both local and fo#eign in)esto#s! *oth $odi
and Jaitely ha)e called fo# what they te#m 24oope#ati)e
%ede#alism, which is essence seems to be gi)ing a #ole to State
(o)e#nment to decide on spending and economic policy, with a t#ade1of
that a uni0ed (oods and Se#)ices -a, will be implemented on an ll India
basis! Some disin)estment of holdings by the (o)e#nment in State1owned
ban.s and businesses a#e also e,pected!
nalysts ha)e e,p#essed the opinion that $odi will not be able to gi)e into
the temptation in this *udget, to pay bac. the )ote#s who elected him! =e
had to play a deft hand balancing out the demands of an electo#ate that
had high e,pectations and the #eality of const#aints placed on p#actical
steps by the actual state of the economy! -he#e was not much #oom fo#
0scal e,pe#imentation and at the same time 0scal consolidation cannot be
deli)e#ed all at once!
In)esto#s catapulted the Indias e8uity ma#.ets to new highs e,pecting the
*udget to outline a #oad map fo# #olling bac. spending on subsidies and
channelling #esou#ces towa#ds p#oducti)e capital in)estment such as
inf#ast#uctu#e! Some analysts belie)ed that the o)e#whelming ma;o#ity the
*J& had in the >o. Sabha would enable it to ta.e potentially unpopula#
decisions on subsidies, though they point out that such mo)es will ha)e to
be calib#ated to a)oid the ine)itable political bac. lash and #oll bac., as in
the case of the #ailway fa#e inc#ease!
$ost analysts dismissed the possibility of big bang #efo#ms in the *udget?
they p#edicted that the (o)e#nment will o)e#cautiously ta.e a long1te#m
)iew of its mission to 0, the defects in the Indian mac#o economy and
#esto#e g#owth!
@allabhbhai &atel statue
7hen the *udget was 0nally p#esented in the
conte,t of these e,pectations and p#edictions,
the only big bang was the setting aside of 6
AA million fo# a statue, going to be the wo#lds
la#gest, of independence leade# @allabhbhai
&atel, in (u;a#at, &#ime $iniste# $odis home
state! -his allocation in a budget which
totalled 6 A01 billion was pounced upon by
c#itics, who 8uestioned whethe# such a statue
was a #eal p#io#ity fo# India at this time! -hey
pointed out that the statue got mo#e money
than womens safety nationwide which was
allocated 6 2B million CIndia is in the midst of
a 2#ape epidemicD and gi#l education which
got 6 1<!B million only!
@allabhbhai &atel was &andit 'eh#us )i#tual
enfo#ce# in con)incing the Indian &#incely
states to opt to ;oin the Indian Enion! -he
@ice#oy >o#d $ountbatten plan, fo# Indian
independence, p#o)ided the $aha#a;as with
such an option! %o# those who opposed the
total c#edit in the independence st#uggle
going to $ahatma (handi and Jawaha#lal
'eh#u, and the subse8uent focus on the
descendants of 'eh#u, Indi#a (handi and he#
family, &atel was the focal point! In fact one
*J& ministe#, in #esponse to c#iticism on the
allocation fo# the statue, pointedly as.ed
whethe# statutes could be only elected fo# the
'eh#u1(handi dynasty!
*eginning of a ;ou#ney
"the# than the c#iticism on this issue o)e#all commentato#s e,p#essed the
)iew that Jaitely had done well to emphasise that the measu#es announced
in the *udget a#e only 2the beginning of a ;ou#ney towa#ds a sustained
g#owth of F to G3 o# abo)e within the ne,t th#ee to fou# yea#s along with
mac#oeconomic stabilisation that includes lowe# le)els of inHation, lesse#
0scal de0cit and a manageable cu##ent account de0cit!
-hese wo#ds togethe# with some #obust but #ealistic budget ta#gets and a
wide #ange of allocations to di)e#se secto#s helped stabilise the ma#.ets
and ea#ned the %inance $iniste# app#eciation fo# his maiden efo#t! mong
the notewo#thy measu#es is the mo)e towa#ds a f#iendlie# and mo#e stable
ta, #egime, encou#agement of %/I in c#itical secto#s, and the focus on
inf#ast#uctu#e including powe# and #oads, and the emphasis to #emo)ing
obstacles to mining!
-he challenge befo#e Jaitely was to continue with the 0scal consolidation
and at the same time c#eate new space fo# despe#ately #e8ui#ed inc#eased
public in)estment! 4ong#esss 0scal de0cit ta#get of 4!13 was #etained,
while confessing that it would be a challenge in the bac.d#op of two
consecuti)e yea#s of low (/& g#owth and humongous subsidy bu#den the
Indian economy ca##ies fo#wa#d!
lthough much was e,pected f#om the budget in #ationalising and
imp#o)ing the ta#geting of subsidies, in essence only an o)e#haul of enti#e
subsidy #egime including food and fe#tilise# subsidies was p#omised at a
futu#e date : an e,penditu#e management commission is to be appointed!
-he pe#sonal income ta, #ate was #aised ma#ginally in a sop to Indias
eme#ging )ocife#ous middle class! -he deduction limit on loans in #espect of
self1occupied housing p#ope#ty has been #aised, to bene0t the same )ested
inte#est! mo#e conduci)e ta, #egime has been p#omised fo# inf#ast#uctu#e
in)estment t#usts and #eal estate in)estment t#usts!
-he *udget did not announce any signi0cant changes in di#ect ta,es eithe#!
Sin ta,es we#e p#edictably inc#eased! Indians will ha)e to pay mo#e fo#
ciga#ettes, ciga#s and othe# tobacco p#oducts! 7hat is notewo#thy is the
emphasis in the *udget on a f#iendlie# ta, #egime? %o#eign /i#ect
In)estment is encou#aged in wide #ange of secto#s including defence,
insu#ance, and #eal estate and in the de)elopment of sma#t cities!
Hagship ma.e wo#. p#og#am of the 4ong#ess, $('R+(, by which #u#al
people we#e gua#anteed a numbe# of days of paid wo#. pe# month, was
#etained, with the ca)eat that it will be #eo#iented to wo#. that is mo#e
p#oducti)e, asset c#eating and substantially lin.ed to ag#icultu#e!
&ublic &#i)ate &a#tne#ships C&&&D in inf#ast#uctu#e ha)e been p#omised a leg
up! new State entity with a capital of Indian Rs! B00 c#o#e will be set up to
p#omote &&&s! -he o)e#all message of Indias 2014I1B *udget is one of
continuity? the di#ectional change analysts we#e p#edicting was not
deli)e#ed, ob)iously on the basis of an acceptance by $odis (o)e#nment
that it was not wa##anted in the cu##ent ci#cumstances of Indias economy!
"ne analyst 8uippedJ 2Rathe# than wal.ing the tal., $#! Jaitely simple tal.ed
mo#e tal.K
Sh#i#ams ta.e
on the *udget
7hile the *udget was a disappointment on
this aspect, the 4onfede#ation of Indian
Indust#ys &#esident ;ay S! Sh#i#am stated
that the %inance $iniste# had boosted
in)esto#s con0dence by committing to a path
of 0scal consolidation! Sh#i#am said that this
will #esto#e mac#oeconomic balance and,
b#ing about a decline in inte#est #ates and
#e)i)e the economy!
Jaitleys p#oposal to set up an e,penditu#e
management committee was also fo#wa#d1
loo.ing, Sh#i#am pointed out! =e also hailed
the announcement of the implementation of
the (oods and Se#)ices -a, and the cautious
app#oach towa#ds #et#ospecti)e ta,es, ta,es
which the imposition on @odafone by the
p#e)ious (o)e#nment caused in)esto#s much
hea#tbu#n!
-he 4IIs &#esident also applauded the setting
up of a )entu#e capital fund of Rs! 10,000
c#o#e to suppo#t ent#ep#eneu#ship? this will
p#omote $ic#o, Small and $edium +nte#p#ises
C$S$+sD and thei# access to 0nance! *ut he
also pointed out that the enti#e ecosystem fo# $S$+ needs to be imp#o)ed
by #educing #egulato#y #e8ui#ements! =e emphasised that de)eloping a
bette# ban.#uptcy f#amewo#. would be a step in the #ight di#ection!
Sh#i#am pointed out that the *udget has ta.en measu#es to ease long1te#m
0nance fo# the new p#o;ects that the (o)e#nment has initiated! %u#the# the
*udget deals with the issue of public secto# ban.s which ha)e been
plagued with #ising le)els of nonpe#fo#ming assets? the *udget while
p#o)iding fo# efo#ts to #e)i)e st#essed assets, had also made p#o)ision fo#
the #ecapitalisation of ban.s! -he *udget indicates that the (o)e#nment is
li.ely to lowe# its sha#eholding in public secto# ban.s by selling sha#es to
the public!
-he #ight signals gi)en in the *udget will help to #e)i)e sentiment in capital
ma#.ets and will encou#age, not only in)esto#s but also households to
in)est thei# sa)ings in 0nancial ma#.ets! Sh#i#am concludes that the *udget
#ecognises the syne#gy between ag#icultu#e and economic g#owth as well
as tac.ling inHation and also p#o)ides a st#ong focus on ag#icultu#e and
#u#al de)elopment! Sh#i#am concludes by saying that the b#oad )ision of the
*udget #eHects a ma#.et1f#iendly app#oach to #e)i)e g#owth and
in)estment, t is a comp#ehensi)e pac.age that add#esses conce#ns in
di)e#se a#eas!
Sops fo# the )ote ban.
"the# analysts point out that the *udget clea#ly th#ew sops at the *J& )ote
ban., fa#me#s, the aspi#ing #u#al poo#, /alits, the middle classes, the youth
and $odis co#e =indut)a constituency! >andless fa#me#s we#e p#omised
cheape# c#edit! -he #u#al poo# got p#omises of b#oadband inte#net
connections, cheape# -@s and bette# #oads! /alit1focused schemes we#e
p#omised mo#e money, the middle class got ta, b#ea.s, the youths got the
S.ill India and /igital India p#og#ams and =induisms holiest #i)e#, the
(anga, was allocated funds fo# a cleanup!
Etta# &#adesh, the state which put the election #esult clea#ly beyond doubt,
was gi)en gene#ous allocations fo# ghat de)elopment and met#o #ailways,
and will stand to gain the most f#om the (anga de)elopment p#og#am!
@a#anasi, the =indu holy city, which is $odis constituency, at which the
Siddha#tha (autama the *uddha also spent time, th#ough which the (anga
Hows, has been gi)en funds fo# its $oslem wea)e#s and a wate#way p#o;ect!
State elections a#e due in the nea# futu#e in a numbe# of states! -he
p#o)e#bial po#. ba##el has been #eally #olled out fo# them : =a#yana got a
=o#ticultu#e Resea#ch institution, Jha#.and a #esea#ch institute fo#
g#icultu#e, $aha#asht#a an ll India Institute fo# $edical Sciences and an
Indian Institute of management, plus ag#i biotech cluste#s and Jammu and
Lashmi# funds fo# pashmina wool and spo#ts stadia! /elhi, whe#e the *J& is
conside#ing fo#ming the local go)e#nment afte# the am dmi pa#ty
#esigned, was allocated money fo# wate# and powe# #efo#ms!
"ne message is clea#J po#. ba##el politics is bac.! *ut did it e)e# go away in
South siaM Jaitely ofe#ed some #elief to ta, paye#s in his maiden *udget,
which was a ma#athon, setting a #eco#d in longe)ity, with a long litany of
schemes and allocations but left those e,pecting big #efo#ms waiting fo#
ne,t yea#!
4utting the de0cit : the gap between go)e#nment e,penditu#e and income
: and getting a g#ip on inHation and stimulating g#owth we#e the ma;o#
challenges befo#e him! =e b#a)ely pic.ed up the challenge th#own down by
his p#edecesso# 4hidamba#am and opted to hold down the 0scal de0cit at
4!13 of (/& this yea#!
Jaitely said that he had 4B days to p#epa#e the *udget and this was the best
he could do! -he *udget speech b#istled with p#o;ects and p#og#ams
g#anted to.en allocations, Rs! 1,000 c#o#e seems to ha)e been Jaitleys
fa)ou#ite numbe#, it is mentioned at least 2G timesK 7hat is new is the
nomenclatu#e : the 4ong#esss ban. of p#o;ect names o# the 'eh#u1(handi
le,icon has been #eplaced by a new *J& nomenclatu#e : fo# e,ample, Syama
&#asad $oo.e#;ee and /eendayal EpadhyayaK -his b#anding, #e1b#anding,
#enaming of inf#ast#uctu#e and p#og#ams, will always happen and in South
sia, e)en in the futu#e until ou# political class #eaches a le)el of matu#ity
when they #ealise the futility of the e,e#ciseK
Jaitely has some classic ac#onyms fo# new p#og#ams! 4onside# the national
mission on 2&ilg#image Re;u)enation and Spi#itual ugmentation /#i)e :
&RS/K 'ational =e#itage 4ity /e)elopment and ugmentation No;ana :
=RI/NK -han.fully nothing is named afte# 'a#end#a $odi : yetK
&#ime $iniste# $odi, as e,pected, endo#sed Jaitleys *udget, tweeting 2the
%inance $iniste# p#esented a *udget that is a #ay of hope fo# the poo# and
downt#odden, it con)e#ts peoples hopes and aspi#ations into t#ust! =e
fu#the# obse#)ed that 2a mo#ibund economy, the *udget has come as a
san;ee)ani Clife1gi)ingD and an a#unoday Csun#iseD fo# the last man in the
line!
n efo#t to manage e,pectations
-he *udget is an efo#t to manage e,pectations, ta.e steps to #e)i)e and
#epai# the economy ta#get sta.eholde#s such as the common man, the
domestic consume# and the fo#eign in)esto#! "nce the po#. ba##el, the
politics and the camouHage weeds a#e so#ted out, the#e a#e indeed some
potentially t#ansfo#mati)e ideas in Jaitleys maiden *udget!
7hile the stoc. ma#.ets which had pea.ed befo#e the *udget plunged while
listening to Jaitely, it su#ged again once in)esto#s we#e able to decode the
abst#use political ;a#gon! (oals of sha#p cuts in (o)e#nment debt, #educing
inHation, splu#ging on inf#ast#uctu#e and c#eating ;obs ga)e in)esto#s
con0dence! 7hethe# any of these announcements a#e c#edible depends on
mo#e details being made a)ailable and the capacity to implement!
$any of the g#and schemes p#omised came? as one analyst caustically
pointed out, 2unbu#dened by detailK Some p#oposals such as those on
#ethin.ing the Rese#)e *an.s moneta#y st#ategy, ta.en by analysts to
mean setting a st#ict inHation ta#get, we#e welcomed! %o#eign in)esto#s,
who had been put of by a p#e)ious cap#icious and e,to#tionate ta, #egime,
welcomed the end to the much1disli.ed #et#ospecti)e ta,ation, albeit
unde#mined by a committee to o)e#see things, while #eite#ating the #ight of
the (o)e#nment to ta, #et#oacti)ely!
'ew /elhi1based #espected economist and hedge fund manage#, Su#;it
*halla, desc#ibed the *udget as 2a )e#y p#o1g#owth *udget fo# the new loo.
India! -he #heto#ic may #ally the faithful, but the p#oof is in the p#ope#,
e5cient and co##uption1f#ee implementation! In this aspect, South sia has
so fa# been wanting! *ut $odis #eco#d in (u;a#at of powe#ful, d#i)en,
allegedly1co##uption f#ee implementation is pointed out by analysts as
gi)ing hope! 7e watch and wait in e,pectation!
C-he w#ite# is a lawye#, who has o)e# A0 yea#s of e,pe#ience as a 4+" in
both State and p#i)ate secto#s! =e #eti#ed f#om the o5ce of Sec#eta#y,
$inist#y of %inance and cu##ently is the $anaging /i#ecto# of the S#i >an.a
*usiness /e)elopment 4ent#e!D