Budget meets popular expectations

What makes a budget a good budget? First of all, it should be realistic. Since it's only an estimation of income and expenditure for the next year unless the estimations of revenue as well as expenditure are realistic the budget will go haywire and creates more problems than it can address. Budget should also lay the foundation for a virtuous cycle of growth and development and to that extend should be imaginative in its approach.

Politics is power and since in a democracy the power comes from the people it should also factor in the popular expectations. I feel the 2019 budget presented by the finance Minister Piyush Goyal meets all these parameters.

To examine how realistic it is let us examine some of the important figures of the budget. Total revenue receipts grew from 14 lakhs 35000 crores in 2017-18 to 17 lakh 29000 crores in2018-19 showing an increase of 20%. The projection for 2019-20 is placed at 19 lakh 77000 crores which is an increase of about 14%. Thus, the revenue projections are realistic and achievable. Borrowing have gone up by 70000crs an increase of 11% but then for the corresponding period interest payments have also increased by 78000 crs.

Thus effectively part of the increase in the interest payments is being met from sources other than borrowings which is a good sign. Fiscal deficit projected at 3.4% of GDP is higher than the the prescribed norm of 3% of GDP but given the populistic aspirations this budget has accommodated it is not substantially off the mark.

This budget would not have been possible but for a series of measures taken in the last 5 years resulting in increase in revenues. Implementation of GST has helped in increased realisation of indirect taxes. Finance minister himself in his budget speech referred to it and mentioned monthly collection of GST has gone up from around 89700 crores in the first year of its implementation to 97100crores. On the direct taxes side there is a growth of about 18% and demonetisation has helped in bringing in 130000 crores into the tax net.

The enactment of the insolvency act and the consequent pressure on the promoters to pay and retain or lose control of the companies has led to 3 lakh crores NPAs already being recovered. Promoters of these companies prospered at the expense of the companies and the fear of losing control over the companies is making them to pay up and retain control. This process will further get momentum with big ticket defaulters like Vijaya Mallya being brought to book.

This would also ease pressure on the government to make budgetary provisions to support the ailing banks. There is increase in the capital expenditure from 316000 crores to 336000 crores in the budget and if projects are imaginatively designed it can lead to crowding in of the private investment.

In meeting the aspirations of the people the budget focuses on three important segments of the population the middle class the farmers and the unorganised. The middle class gets a big relief in terms of no tax up to an income of Rs 5 lakh a long pending aspiration. The unorganised sector which doesn't have a lobby and hence never in focus got the required focus in terms of a pensionary scheme. Direct money transfer scheme targeting the small farmers may turn out to be a game changer in years to come.

More than a decade back when we were still in service and were attending orientation course in IIM Ahmedabad one of the focus issues was how the present schemes of the government are inefficient in passing on the necessary benefits to the targeted groups and that as an alternative direct income transfer would be far more efficient in ensuring the benefits reach the targeted group. Given the status of the land records implementation of this scheme to the farmers across the country may pose serious challenges but if it can be properly implemented can turn out to be the alternative way of reaching out to the targeted group for other schemes as well.

The fact that benefits are being passed on directly can also lead to purification of the land records themselves which to some extent has already happened in states like Telangana where the scheme was introduced. But implementation of this needs lot of coordination between the states and the centre since land records are essentially state subject. Already the friction could be seen with Mamata Banerjee rejecting the scheme itself. Accommodating popular aspirations without substantially violating the prescribed fiscal parameters makes this a balanced budget.