FM’s Budget speech covered an enormous amount of ground while being audaciously low on specifics and timelines. But it was high on intent and thematics.


The Finance Minister Nirmala Sitharaman wore a shade of auspicious crimson on Budget Morning. And the document she read from was wrapped like a traditional ledger, a bahi khataa, in red cloth, tied with golden string, embossed with a gold Ashoka Stambha.

It was a visual jettisoning of ideas, sequences and straightjacket that came with the erstwhile colonial-era briefcase. The budget itself was not an allocation of funds under different heads with an attempt to balance both sides of the ledger anymore—it was a things-to-do list that the money must be found for. Former FM Arun Jaitley, in his five budget presentations, hadn’t gone into free-form, but Sitharaman did.

Nirmala Sitharaman said, in a press conference that followed, that this budget was “A ten year vision with a five year target”. It was, as in Modi 1.0, where various things were time-lined for 2022, India’s 75th year as an independent nation, a typical Modi government move. It seeks perhaps, to blur the edges of one term of NDA in office into another via its transformational agenda.

It was a different kind of budget speech too, taking on from the optimism of the “Blue Sky Behavioral Economics” and Nudge Theory mentioned in the Economic Survey. That cited the voluntary giving up of subsidised cooking gas cylinders by the better-off in Modi 1.0. It also cited a number of economic inspirations from ancient India alongside the Asian universe. This, in a departure from ideas solely emanating from the “East Coast of the United States”.

The budget speech, which had its share of wisdom quotes, was artful too. It covered an enormous amount of ground while being audaciously low on specifics and timelines. But it was steroid-strength high on intent and thematics. It upended the order of emphasis. It made a concerted effort to inspire fervour, belief, esprit de corps.

However, it did not neglect substance in a bewildering kind of way, with hundreds of modernist tweaks to how this country must act and see itself going forward with little allocations in its wake. The elephant in the room was how India will pay for it all without runaway inflation or fiscal hara-kiri. But if most things are multiple-year endeavours, then the slicing and dicing in a given year’s balance sheet usually takes care of the fiscal prudence.

The stock market, made up of prosaic money men, ducked its head, wondering why it still had to pay irksome capital gains tax when we were on the $5 trillion bus.

There were some moves, not very substantial, to recapitalise the banks and bail out the NBFC sector. Housing Finance, like a naughty boy, will now be supervised by the RBI. Divestment will continue to be something the government wants to do. The Railways will get massive investment indicated as an ask, via off-budget methods, esoterics like PPP, and so forth.

For a government big on national security, there was practically no mention of defence, except to say that defence equipment imports will be free of customs duty. This implies that all purchases will be conducted off budget. Allocations in the fine print are to run the administrative expenses of the armed forces.

The presentation was thick with dozens of procedural improvements towards promoting greater efficiency and ease of usage, such as interchanging Aadhar with PAN and “faceless Income Tax scrutiny”.

However, there were a few announcements that stand out. And these, for their potential to be transformational. The government will permit 100% foreign investment in the leasing and financing of aircraft—a virgin area domestically. It will also do so in animation, media, and in insurance intermediaries. It will further encourage FDI into real estate, aviation and single-brand retail, setting up huge manufacturing for all manner of relocated things from China. It will also encourage the setting up of massive operations and maintenance infrastructure. The domestic finance market does not have the heft to invest in most of these new thrust areas.

The current maze of Labour laws, and even the archaic rental laws are going to be reformed.

In a possible recognition of high domestic government debt of $2 trillion against a present GDP of $2.7 trillion, the Finance Minister pointed towards India’s very low external borrowing. This, even as the fiscal deficit target was still being capped at 3.3%.

She said India’s hard currency external borrowing was some 5% of the total, and among the lowest in the world. Then she announced the government’s intent to borrow more in foreign currency, to the delight of the domestic debt and bond markets.

This will be good, when combined with foreign collaboration in infrastructure development. If the announced Rs 100 lakh crore for infrastructure in the next five years comes, it could flow substantially from external sources. This, of course, is also the glide path to the $5 trillion economy in one go, even if all else flatters to deceive.

The budget speech showed consistent concern for improving the lot of the rural and urban poor. This, mostly with missions and infrastructure development, rather than the doles favoured by the UPA. The latest mission, launched even before the budget, after electricity, cooking gas, and toilets, in Modi 1.0, is piped water for all.

The emphasis on housing for all, but not real estate, and indeed all the other last-mile provisions as yet incomplete, is carried over into Modi 2.0. There will also be many more rural roads and other facilities. This approach has gone down well with the voting public of all castes and creeds, as the massive winning mandate has shown, and it makes great political sense to continue with it.

The smaller corporate entity, up to a turnover of Rs 400 crore per annum, is now included in a tax rate capped at 25%. This was hinted at in the interim budget, when only those under Rs 250 crore were qualified, and has been delivered now. That it thereby brings over 99% of companies within its ambit is the remarkable thing. There are just 0.7% of companies in India which are bigger than this.

Perhaps now, many of the smallcaps and midcaps will march on into the big league and make space for the new entrants and startups. This budget dwelt on incentives and motivations for the startup space. It is clearly seen as a priority area, though Indians living in India are not the most innovative of people.

There are no changes in direct tax rates from those that were announced in the interim budget. They exempt over 80% of income tax payers, who earn no more than Rs 5 lakh per annum. The broad-based fuel-using public has  been served with a single rupee in additional excise duty per litre. And this, predictably, excited a great deal of comment.

This budget also introduced another couple of taxes on the rich, but mercifully stayed away from the reintroduction of unworkable Estate Duties. A higher surcharge on income tax of 3% up to 7% will apply to those who earn taxable income of Rs 2 crore per annum or above, and there will be a 2% TDS on cash withdrawals of over Rs 1 crore p.a. from a single bank account.

There was a great deal on electric vehicles—incentives for manufacturing them with an ambition to become a global hub. There will be subsidies for buying them, and a big push to the setting up of Electric Charging Stations, the manufacture of Lithium-Ion batteries and Solar Photovoltaic Cells and other “green” equipment. If the idea catches on with the automotive sector, it could do well, even though nascent electric vehicle technology, high cost and no charging infrastructure as yet, are daunting.

The Budget, like the Economic Survey before it, glossed over all the problem areas. It made no mention whatsoever of a severe economic slowdown and shortfall in targeted revenue collections. Instead, it talked up a rise of 78% in direct tax collections over the last two years.

Sitharaman elaborated that the economy had grown by $1 trillion between 2014 and 2019. And that it would reach $3 trillion in the course of this financial year. India is already the 5th biggest economy in the world at $2.7 trillion, and 3rd, if its status is calculated in PPP terms. So, $5 trillion, here we come, and never mind the impediments in between!

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