Soporific speech, sensible Budget

If finance minister Arun Jaitley’s Budget speech was as crisp and focused as his post-Budget interview to Doordarshan, it is almost certain that Prime Minister Narendra Modi’s many supporters and well-wishers would have had an extra bounce in their steps.

Unfortunately, Mr Jaitley’s maiden exercise in reading from a prepared script left just too many viewers — apart from those deeply involved in finance and industry — completely underwhelmed. Apart from the fact that the entire exercise in Lok Sabha took up more than two hours (with interruptions), the speech meandered its way through a dhobi list of proposals, some critically important to the future of the Indian economy and taxpayers and others that seemed remarkably trivial. Matters weren’t helped by the fact that
Mr Jaitley, a remarkably good lawyer, is better speaking extempore than reading from a prepared script.

In the 1960 debate during the US presidential election — the first time such an event was broadcast over the electronic media — there were two very distinct responses. Those who watched the debate on TV — and most American voters did — were quite emphatic that John Kennedy had outscored his rival, Vice-President Richard Nixon. At the same time, the minority who heard the debate on radio were equally emphatic that Nixon was the winner.

In a similar vein, Mr Jaitley’s Budget proposals are calculated to look far more appealing when presented in a capsuled form than when heard live. On the floor of the Lok Sabha,
Mr Jaitley’s presentation lacked a sense of hierarchy and, apart from the first few paragraphs that outlined his larger political philosophy, the listener was left in some confusion as to what it all added up to.

In the interview room, Mr Jaitley explained the overall thrust of the Budget with such lucidity that the plethora of details fell very neatly into place. It almost seemed that Mr Jaitley had dictated the initial paragraphs of his script and outsourced the rest to his finance ministry officials who put the unmistakable stamp of babudom on the speech. Indeed, had the Budget not been unscrambled by the minister, the immediate ridicule it attracted in the social media would have become conventional wisdom.

First impressions, unfortunately, tend to linger and Mr Jaitley’s Budget speech conveyed the impression of both lacking focus and being dreadfully boring, especially since the by-now mandatory poetic finale was lacking.

Mr Jaitley should be grateful that a Budget speech, unlike many other ministerial interventions, has a lengthy shelf life. Therefore, despite this surprising — by the exacting standards set by Team Modi — failure in political communication, the end message is likely to endure. And this message was overall positive.

In attempting a balancing act between the over-optimism of achche din and the grim realities of a severely depleted state exchequer, Mr Jaitley emphatically sided with the forces of fiscal prudence. Maybe there was a bit of needless bureaucratic conservatism in maintaining that the starting point of the fiscal deficit was 4.5 per cent of GDP — a figure that conventional wisdom deemed the financial community would be able to digest.

But the roadmap he set for bringing the deficit down to 4.1 per cent has appeared credible because the promise of fiscal consolidation was not accompanied by a rash of populist, but ultimately self-defeating schemes. For a change, a government has drawn the right messages from the uncomfortable realities of an empty treasury, low growth, the unexpected rise in petroleum prices following the Caliphate problem in West Asia and the likely drought in central and western India. It has acted with exemplary responsibility.

The finance minister’s task was to accept the lack of elbow room and yet, within this limitation, to create the conditions that would get India back on a higher growth path. From all accounts, both industry and potential investors believe that Mr Jaitley has taken many right steps in that direction. The significance of the complicated changes in excise rules and tax procedures were possibly understood only by chartered accountants and a few affected parties, but by detailing them with the exactness of a corporate lawyer, Mr Jaitley appears to have revived a great deal of confidence in the Indian business environment.

To secure a better ranking for India’s ease of business index will possibly take more sustained effort and lot of actual movement on the ground. However, Mr Jaitley has taken the right steps in the right direction.

This restoration of business confidence is of more importance to India than the political class would acknowledge. Unless investors start putting money back into India, growth will not return and there will be little hope of meeting the demanding revenue targets the Budget has set for the government. Worse, unless growth returns, Mr Modi can say goodbye to all his ambitious schemes to create smart cities, create a diamond quadrilateral and give jobs to the impatient youth that voted for him in such large numbers.

The Modi government appears to have learnt a few important political lessons from the experience of the Atal Behari Vajpayee regime. The Vajpayee government was often insufficiently mindful of the concerns of the vast army of the lower middle class that constitute the electoral backbone of the BJP. It was their indifference to the lofty reforms process that contributed to the NDA’s unexpected defeat in 2004. This time, Mr Jaitley’s Budget has addressed their expectations.

The cuts in personal taxes may not be dramatic and just about keeps pace with inflation. However, by accepting the principle that individuals must have more money to spend on their families, he has signalled the government’s responsiveness to their concerns. Widening the tax base is a principle favoured by economists. At a time of slow growth, the Budget has recognised that taxing people less is preferable to taxing more people.

This is an important area of difference between the low tax principle favoured by the BJP and the over-zealous “tax terrorism” of the UPA.
This Budget has a huge amount of saleable items to India’s very different stakeholders. It is this message the BJP has to disseminate because the larger political message wasn’t very clear from Mr Jaitley’s Budget speech.

Next year, he must devote as much time to crafting his Budget speech as he does to actually formulating its details. A Budget is too important to be left to babus with no commitment to the politics of this government.

The writer is a senior journalist