Arun Jaitley has presented his second Budget. He has been restrained and workmanlike in his approach, making up for the shopping list he had presented in 2014.

There are few shibboleths this time, with ‘FDI’ and ‘PPP’ barely making an appearance. Clearly, Jaitley is a quick learner. But he is also a career politician partial to the use of gestures. Thus he could not resist announcing new IITs, IIMs and three institutes on the lines of AIIMS (All India Institute of Medical Sciences) even as there is much scepticism on the success of the ones recently set up.

Jaitley has claimed more than is credible for his government in the nine months it has been in power.

Naturally, he has seized upon the Central Statistics Office’s revised GDP estimates which show much higher growth of the economy. His claim of having re-established macroeconomic stability, thus restoring “credibility” to the economy, is difficult to accept.

The decline in inflation and reduction in the current account deficit are both due to the more than 50 per cent decline in the international price of crude oil. This has helped the government attain its fiscal deficit targets.

Not so grand

On the central task before him, Jaitley is quite certain. It is to energise the economy through growth. He recognises that investment is necessary for growth and that public investment in infrastructure would be necessary. But he is also committed to not deviating too much from the pre-set targets for the path of fiscal consolidation.

There has been announced an increased allocation of ₹70,000 crore for infrastructure, with most of it going to roads and railways. While the direction of this investment is surely right, the sum involved is not very impressive. We don’t know the percentage increase over the revised estimates for 2014-15 that the Rs 70,000 crore represents, but we know from the finance minister’s speech that additional capex of the government “as a whole” will amount to 0.5 per cent of GDP.

t the present juncture this appears to be too little.

Two options, neither taken

So what could the finance minister have done under the circumstances?

He had two options, but has chosen to exercise neither of them. The first was to allow a breaching of the fiscal deficit target for this year itself. A higher capex would now have been possible. Jaitley has on earlier occasions shown himself to be somewhat fundamentalist when it comes to the fiscal deficit.

It is interesting that this has been ignored, even though India — unlike the US — does not have lobbies actively working towards limiting the size of government. This takes us to the second option for scaling up public capex beyond 0.5 per cent of GDP. Fertiliser and food subsidies offer scope for reduction. Here his political instincts have come into play, with a little help from a party skittish after the Delhi elections. For someone so reluctant to increase public investment Jaitley has not come up with adequate arguments for why he expects private investment to rise to the challenge of taking India to the double-digit growth of his ambition. While the Budget’s push for growth may have been somewhat mild, it does contain some significant initiatives.

The most impressive among these is the move towards universal social security, though we must wait for the details. Secondly, the MSME sector has received attention, with the SC/ST among the self-employed there to receive priority in funding.

Finally, Narendra Modi’s significant supporters have been rewarded by a lowering of the corporate tax rate. There has been some deft balancing.

The writer is a professor at the Centre for Development Studies, Thiruvananthapuram

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