The first Budget of the Narendra Modi government, after securing the resounding public mandate for a second term, is high on intent but low on substantive measures required urgently to arrest the economic downslide, boost consumption and private investments, and create jobs. It is at best an incremental welfarist Budget with no bold steps or out-of-the-box initiatives. The disinvestment target of Rs 1.05 lakh crore appears too ambitious at a time when repeated efforts to privatise Air India, the ailing national carrier, have not made much headway. Finance Minister Nirmala Sitharaman was more loquacious on the NDA government’s broader vision to make India a $5-trillion economy over the next five years but her revenue efforts represent a mix of progressive taxation, dipping into the petroleum sector for collecting more taxes and growing protectionism by way of increasing import duties on certain goods. The government needs to bite the bullet on reviving the investment cycle and also reforming the land and labour laws to unleash the full potential of the economy. However, a big drive towards privatisation, relaxation in the foreign direct investment (FDI) policy, including norms for foreign portfolio investors, a new policy on rental housing, an incentive package for faster adoption of electric vehicles are among the positive initiatives. So are the measures pertaining to the rescue package for non-banking financial companies (NBFCs), big bank recapitalisation and removal of angel tax for startups. By offshoring the government borrowing, Sitharaman has sought to ease the pressure of borrowing on the domestic market.
At a time when the country is reeling under job woes, the Budget had nothing to offer to ease one of India’s biggest pain points. The unchanged personal income tax structure has come as a dampener for the salaried middle class while the corporate tax rejig should have been made applicable to all companies. Similarly, the Finance Minister opted for a pick-and-choose regime of import duties, which only amounts to protectionism. While the announcement on infusion of Rs 70,000 crore in the coming fiscal for recapitalisation is welcome, it must be followed up with governance reforms in banks. The Defence Budget remained virtually unchanged, putting a question mark over modernisation of the sector. The armed forces were hoping for increased allocation as they are in the midst of a modernisation process, with several projects waiting to be kicked off. The country’s super rich will be taxed more while the prices of diesel and petrol are set to go up. However, home buyers have something to cheer with an additional Rs 1.5 lakh interest exemption. Overall, the Finance Minister’s prescription for growth appears to focus on domestic and foreign investments and a massive infrastructure thrust.