The Union budget presented today by Finance Minister Arun Jaitley was unique in more ways than one. Firstly, instead of the last day of February, the Budget Day was brought forward to the first day. Secondly, for the first time in 92 years, the railway budget was merged into the General Budget. Finally, the distinction between Plan and Non-Plan expenditure was scrapped and expenditure would henceforth be classified under the heads of Revenue and Capital Expenditure. As these changes were implemented prior to the budget, there was an expectation that the budget would be a path breaking and game changing one. 

Now that the budget has been presented, it is safe to say those expectations have been dashed – just as they had been in the previous year and the year before that.

The budget was a fine exhibit of bureaucratic unoriginality. It seemed like a rehashed version of the previous budget and reminded me of my MBA days when students would copy the assignment of their roommate while making a few small tweaks and hoping the professor would not notice. In other words, the budget was a non-event. This year’s Budget is strikingly similar to the previous one. 

The circumstances post demonetisation called for an extensive review of economic policy based on ground reality. Instead, all we got was more of the same.

What the budget lacked in originality it made up for by providing data on deposits post-demonetisation. The information that people were eagerly awaiting so as to figure out whether the pain and disruption imposed on them through demonetisation was even worth the trouble. Between November 8 and December 30 2016, deposits between Rs 2 lakh and Rs 80 lakh were made in about 1.09 crore accounts with an average deposit size of Rs 5.03 lakh. Deposits of more than 80 lakh were made in 1.48 lakh accounts with average deposit size of Rs 3.31 crores. Hopefully, the tax authorities will extract the required evidence needed from this data to catch hold of black money holders. 

Widening the tax base of honest taxpayers is definitely the need of the hour as only 76 lakh individual assesses declare income above 5 Lakh, out of which 56 Lakh are in the salaried class. Contrast this with the 2 Crore Indians who flew abroad in 2015 to ascertain the high level of under-reporting of income. To ensure that more people are within the tax net, income tax in the tax slab of Rs. 2,50,000 to 5,00,000 has been reduced from 10% to 5%. This will incentivise people earning in the lowest tax slab to disclose their income.

The defining theme of FY18’s budget was the focus and importance given to rural incomes and infrastructure spending. Total allocation for the rural sector in 2017-18 is Rs 1,87,223 Crores, 24 per cent higher than the previous year. Within this allocation, Rs 48,000 Crores is allocated to MGNREGA (Yes, the same scheme that BJP opposed vehemently while UPA was in power), which is marginally more than the previous year’s allocation (although Rs 38,500 Crores were allocated in last year’s budget, the Revised Estimate figure stood at Rs 47,499). The increased allocation to rural segment should help alleviate the pain caused by demonetisation and help the informal sector, which is predominant in rural areas, to get back on its feet.

With regard to infrastructure, nearly Rs 4 lakh crore has been allocated in the budget. For a developing country like India, this will provide a boost to economic activity and build a platform for future development. The government also initiated a set of Electoral Funding reforms to bring in transparency. How effective these steps would be in cleansing the political system is a matter of great debate.

As far as Fiscal Policy goes, the Government maintained a fairly conservative stance by pegging the Fiscal Deficit at 3.2 per cent of GDP for FY18 and 3 per cent for FY19. If you are wondering what the fiscal policy is, it is the piece of information that most economists are generally fixated upon. The best way to spot an economist is through the incessant use of the word “fiscal”. In this case, the Government has done well to eschew fiscal profligacy or fiscal stimulus and opting for fiscal prudence so as to stay on the path of fiscal consolidation and fiscal responsibility. Basically, fiscal deficit is the difference between government Expenditure and government receipts. Having a reasonable fiscal deficit number ensures that the government is not spending beyond its means and is not left vulnerable if and when an economic slowdown erupts.

The doubling down on its previous strategy may not necessarily be a bad thing, but the gaps in policy will continue to remain unfulfilled. For instance, the Centre continues to overlook important areas of policy in Social Sector like delivery of essential services, Healthcare and Education. Social indicators in Health and Education are abysmal. An effective management of resources would have ensured policies, which would fulfill these gaps. 

The Narendra Modi-led government was elected on the plank of transformational change not “more of the same”. If the government is short of policy ideas, then it has to make it up with a greater intent and implementation of existing policies. Even then it is difficult to envision how it can bring about a transformation in the society.