Millennium Post

Paean to private innings in public growth narrative

The maiden budget of the National Democratic Alliance government led by Prime Minister Narendra Modi and put together by Union Finance Minister Arun Jaitley is really a reconfiguration of the idea of public spending by stamping the hallmark of Modinomics all over. Peppered with many smaller, low-intensity projects, which put together can coauthor a new chapter in Indian economic story, the primary thrust of the general budget 2014-15 is an unequivocal, and perhaps, even a tad reckless, reliance on private capital, whether in the form of the PPP (public private partnership) model, or as greatly increased influx of foreign direct investment (FDI), to spruce up the growth graph. Jaitley’s effort has been no doubt about minimising the gaping holes in the fiscal edifice, with his unflinching admission of setting the fiscal deficit target at 4.1 per cent of the GDP for 2014-15, one that had been projected by former finance minister P Chidambaram. But at Rs17 lakh crore of planned spending and Rs 12 lakh crore of non-planned expenditure, the inaugural budget proposal is an attempt to compensate the lack of scale with a prodigious and comprehensive focus on many tinier tales.

    Let’s look at the big stories first. Firstly, floodgates of FDI have been opened in sectors like defence and insurance (both raised from previous 26 to 49 per cent) overtly, while scope for enormous private participation, either as FDI or PPP, has been handed over in infrastructure schemes. These include earmarking Rs 7,060 crore for 100 ‘smart cities’, promising to amass Rs 10,000 crore of private capital for start-up companies, Rs 37,800 crore of investment in national and state highways, Rs 4,000 crore for affordable housing through national housing bank and Rs 8,000 crore for rural housing scheme. But what really takes the cake on one hand and also somewhat compromises the ambition and rigour of the economic allocation on the other is the slew of the so-called ‘Rs 100-crore projects.’ Almost Bollywoodesque in their financial compass, the string of announcements include delicate projects which are meant to cater for the underprivileged across class, gender and regional divides, but end up becoming crumbs that within themselves would tantamount to a mockery of welfare projects. That is because the designated amount, Rs 100 crore, would fall woefully short to even launch these nationwide programmes to be deemed seriously effective. Hence, the big vision and good governance behind the schemes like Beti Bachao Beti Padhao, modernisation of madrasas, metro in Lucknow and Ahmedabad, 1MW solar parks, virtual classrooms, national industrial corridor authority, Ghat development and beautification, and even community radio service, are basically the regimespeak behind a paradigm shift from a dole-heavy, subsidy-driven policymaking to one that banks almost entirely on private capital to shore up the extravagant revenue needed to fulfill the promises thus made.

      Secondly, the tax regime has been given cosmetic tweaks, with the middle classes getting new income tax reliefs up to Rs 2.5 lakh per annum (senior citizens getting slightly more), but there has been no attempt to embolden the corporate tax structure. While the goods and services tax is slated to be approved by the end of this year, retrospective taxation of corporate behemoths, particularly the foreign MNCs, has been left out of the picture, thus stubbing out a huge source of government revenue. However, 10-year tax holiday for power generation companies is a prudent step to bolster the sagging sector, as is the tightening of the noose around cigarettes, pan masala, alcohol and other legal but unhealthy products, as well as diamonds, imported goods etc, in the so-called ‘sin taxes.’ As a toast to middle-class aspirations, excise duties have been relaxed for electronic goods like laptops, LEDs, LCDs, food processing items, footwear, fuel, soaps, among a host of other staple products of popular consumption. 

      However, the novel proposition of Modi-led NDA’s first annual budget is its determination to sweep the traditionally neglected regions like Jammu and Kashmir and the Northeastern states off their feet. Hence, the Rs 500 crore allocation for rehabilitation of displaced Kashmiri Pandits, Rs 100 crore to build a sports university in Manipur, floating a new 24/7 TV channel for Northeast India and a number of other initiatives aimed to mainstream these conventionally marginalised states. Projects that would surely create job opportunities, like cleaning of the riverine systems, future space missions, railways in border areas, technology development, textile and tourist hubs, have been announced, ostensibly with the intention of gathering enough private investment to see them through. In a similar vein, making budgetary allocations for the education sector, such as maintaining the education cess at 3 per cent, proposing five more IIMs, IITs, earmarking funds for new AIIMS and programmes to spread digital literacy and create skilled work force, are commendable.

     That said, the budget is not without some obvious drawbacks. Despite all the hot talk of bringing back black money, there is not a whimper in this document to that effect. Pro-people schemes of the last government such MGNREGA, food security act have been left untouched, and no further commitment to ensure proper implementation have been sounded. This overreliance on private innings in the national growth narrative might backfire, since depending on the whimsies of the market for economic recovery without proactive policy interventions to undertake deep reforms is a gamble that might get out of hand.
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