This columnist is not among the fortunates who have had extensive interaction with Finance & Defence Minister Arun Jaitley, despite having known this very personable of politicians for 25 years. The man who is widely considered as having the second most important job in the country after Prime Minister Narendra Modi, has invariably been courteous, and with a boyish sense of humour. Such warmth contrasts with his predecessor, the dour if cerebral Palaniappan Chidambaram, who seemed to view most of those who floated into his space as nuisances or as nincompoops. Although Chidambaram showed himself to be innovative in his 1997-98 budget, cutting tax rates and calling for an amnesty designed to bring black money into the tax, that spirit had clearly been drained out of him in his second incarnation as the Union Finance Minister. Much to the joy of the BJP, Chidambaram refused to lower tax rates, and instead re-established the punitive tax regime favoured by Indira Gandhi, perhaps in homage to UPA chairperson Sonia Gandhi. From the 1997 Dream Budget to his UPA-period “nightmare” budgets, Chidambaram came a long way, and contributed in no small measure to the present pitiful tally of his party in the Lok Sabha. Voters swarmed to the BJP because of their certainty that Prime Minister Modi would usher in change, an expectation fed by the powerful invocation to progressive policies repeated by Narendra Modi in venue after venue.
The 2014-15 Union Budget will be the clearest indication that change has indeed come to India, now that Narendra Modi has replaced Manmohan Singh as the lawful occupant of 7 Race Course Road. Finance Minister Jaitley will need to go beyond the advice given to him by a Chidamabarised (i.e. non-innovative) bureaucracy, or by “experts” chained to theories that have ceased to be valid even in the faraway locations where they were thought up. When Jaitley’s predecessor spoke of his Harvard connection, what was forgotten was the fact that those from the Ivy League have presided over some of the most disastrous mistakes made by US administrations, such as getting into Vietnam in the 1960s or creating the conditions which resulted in the financial crash of 2008. What Jaitley needs is a clutch of individuals who understand ground reality in India, and who have ample stocks of commonsense. The very qualities, in fact, that Prime Minister Modi has demonstrated so convincingly over his years in office.
Hothouse experts and timid officials will ask the Finance Minister to hold off from tax cuts or other “unorthodox” measures, hoping that he will follow in the pedestrian path of P. Chidambaram and retain high rates and complex rules. Should Arun Jaitley follow such a route, he would be throwing ice-cold water on the tens of millions of taxpayers who voted for Narendra Modi. What is needed is much lower tax rates, not simply a cosmetic cut. At the same time, “low impact high incidence” taxes such as the Securities Transaction Tax need to be retained. What is needed is faith in the entrepreneurial spirit of the Indian businessperson, so that he or she is given a tax and policy framework conducive to growth, rather than remain subject to a barrage of restrictions and imposts designed to feed the craving for control (and thereby bribes) of a colonial-era bureaucracy.
If any single event has the potential to decide the way in which expectations will travel now that Modi has been given the parliamentary majority he asked for to complete the job of putting the economy on track for 15% growth, it is the first Union Budget of the Modi period. A very heavy responsibility rests on Arun Jaitley to ensure that the promise of change made by the Prime Minister gets carried out rather than thrown into the wastebasket, the way so many political promises have been in the past. The changeover from Sonia-Manmohan to Modi is anything but routine, and it is during the initial months that expectations will set, either be shown to be justified, or give way to disillusionment and despondency.
As Prime Minister Modi well knows, confidence and optimism among the public is essential to the success of his vision for a prospering and peaceful India. The coming Union Budget will be core to ensuring the creation of just such a spirit.