Prime Minister Narendra Modi’s address — which was actually a renewed appeal to the nation for support — 50 days after his demonetisation announcement, was an anti-climax of sorts for those who expected big-bang revelations. However, it did not fail to provide a glimpse into what the Budget might have to offer. Perhaps acknowledging that the effects of the note withdrawal were more serious than what the Centre had expected, Modi rightly reached out to farmers, small industry and the lower middle class — constituencies visibly hit by demonetisation. Enhanced flow of working capital will help small industry and agriculture overcome their cash crunch and resume their production cycles. The conversion of Kisan Credit Cards into RuPay cards is likely to ease transaction headaches for farmers, which is also a subtle admission that the cash crunch is here to stay. The easing of cash credit limits for small industry, and the extension of the Government’s credit guarantee to ₹2 crore, from ₹1 crore, is a message to banks to lend more freely. The Reserve Bank of India must now ensure that NPA-burdened banks shed their risk aversion and instead put in place robust, decentralised banking systems to cope with the micro-realities. The Budget may offer tax concessions for the middle class, as a recompense for putting up with hardship. Apart from tax sops, enhanced government spending might become necessary to offset demand compression and perk up investment sentiment. Unless the Prime Minister’s Garib Kalyan Yojana rakes up large sums of unaccounted wealth in the next fiscal, a fiscal deficit higher than 3 per cent of the GDP seems inescapable in 2017-18. The Centre’s immediate priority, particularly in view of the upcoming elections, would be to ensure that the rabi season goes off smoothly.

However, the address disappointed by not shedding light on how and when the existing cash crunch would be addressed, save saying that the withdrawal limits at ATMs have been raised to ₹4,500, from ₹2,000 at present — the former was, in fact, the limit announced on November 8! The Centre and the RBI have steadfastly refused to provide information on the value and denomination of new notes in circulation — something that every citizen is entitled to know since it concerns access to her own money.

His speech, as on November 8, stuck to an oversimplified view on the role of cash in perpetuating black money as well as inflation. Apart from cryptically saying that the law will catch up with black money hoarders, the Prime Minister did not reveal a larger plan, instead positing the issue as a social evil rather than a socio-political problem. His silence on electoral reforms, save suggesting simultaneous polls, was surprising. Most disturbing of all was the lack of introspection on the growing overreach of the state, and ironically its direct role in distorting the field for bonafide economic agents.

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