The interim union budget presented by Smt. Nirmala Sitaraman gives a very good Birds Eye view of the big transformation that has happened in the last 10 years under Prime Minister Modi’s leadership. The transformation of this economy has been truly remarkable not just for its scale, speed and sensitivity towards the poor but for its audacity to benchmark itself to the world’s big economies worthy of emulation and comparison.
Some of these transformations are really tangible, like the airports, roads, warehouse ports, and related infrastructure. There are many others, like the large number of IITs, IIITs, IIMs, AIIMS, and hundreds of other new universities that have come up in the last decade that People can still get to feel and experience. What has changed in a mighty way but is not so visible in day-to-day life is the way the governance has transformed.
From being a fragile 5 economy to being one of the fabulous five economies of the world, this has been a massive, adventurous journey for India. And this didn’t happen overnight or by a magic wand. It took a lot of courage, conviction and a corruption-free mindset to bring about this change. 10 years of governance and not a single scam pointing at any minister or senior officer at Delhi speaks of how the transformation has happened.
This Sanskrit verse speaks about a very interesting aspect of leadership focusing on the ability to yoke the resources for the larger goal.
अमन्त्रमक्षरं नास्ति नास्ति मूलमनौषधम्।
अयोग्यः पुरुषो नास्ति योजकस्तत्र दुर्लभः॥
The translation broadly is thus – there is no letter that cannot be used as a mantra, there is no plant that cannot be used as a medicine, and there is no person who is useless, but the rare person is one who coordinates and Marshalls all these resources in the right way for the larger cause.
Seen this way, one cannot help but appreciate and stand astonished at the leadership quality of Prime Minister Modi, who has been successful in taking on the role of this yojaka / coordinator. It is the same set of banks in the public sector domain that had nearly collapsed with the huge burden of over 6% NNPA, while today, the same banks are so healthy with less than 1% NNPA. And they are so stable that they have generated a cumulative profit of over 1,00,000 crore at the industry level last financial year. What has changed is the way the goals are set, with the top leadership leading from the front in ensuring the targets are met with the highest efficiency and effectiveness. No more phone banking, in half jest if you wish!
Take another example of the much-discussed GST. The earlier UPA government created such a huge trust deficit with the states due to their not being true to their words on service tax transformation that the states refused to engage with the GOI (even if it was a new government under BJP) without constitutional guarantees. But PM Modi, himself coming from a state leadership position for 12 years, saw the validity of their argument. So much so that the compensation at the rate of 14% was built into the law for the first five years to ensure that the states don’t suffer, if at all. The numbers released in this budget on tax buoyancy for the state taxes subsumed by GST of the last five years tell a tale.
States’ SGST revenue, including compensation released to states, in the post-GST period of
2017-18 to 2022-23, has achieved a buoyancy of 1.22. In contrast, the tax buoyancy of State revenues from subsumed taxes in the pre-GST 4-year period of 2012-13 to 2015-16 was a mere 0.72. What this means is that due to GST being brought in, the tax collection has drastically gone up – for two reasons – stricter enforcement so that there is no leakage and, at the same time, the effective neutral tax rate being less than the earlier rates (12% vs 14.5%), compliance has drastically increased. From less than 70,000 GST collection at the beginning to over 1.72 Lakh Cr GST collection for the month of Jan 2024 is a massive step for the country.
The key point being made is that what is good for the country has been taken up, finetuned and efficiently implemented to create a long-term sustainable solution.
What does this interim budget tell us? While the full budget is expected in July 2024 once the new Government takes over, this interim budget is a budget of immense value. The following are the key takeaways – confidence, clarity and continuity.
Confidence – With general elections around the corner, if following trends of earlier governments were any clue, there should have been massive “freebie” announcements, with obviously no commitment (as the budget will be passed only as a vote on account for the basic continuation of Government expenses till elections are over). But what you heard from Nirmala Sitharaman was a fantastic report card on the key parameters that have changed in the last 10 years – a transformation that has made the life of the poor easy (ease of living, as PM terms it).
A potential freebie point – free electricity offered by the main opposition in the absence of any concrete nation-building proposals – has been nullified as a sustainable solution. Suryodaya scheme – the one that allows 1 Cr households to implement solar panels to generate electricity works as a win-win formula. The country saves on electricity production costs, while the people get free electricity & also additional inflow, due to the sale of electricity.
This kind of utmost confidence is seen when, in a span of 10 years, a government has undergone immense transformation. And intends to do so.
Clarity – Only when you have a vision, backed by a measurable plan, that you get to see clarity in thought and action. A 5 Tr$ economy by 2025-26 (may be pushed ahead by a year or so due to COVID-19), a 10 Tr$ $ milestone by 2030, and a developed economy status by 2047 are excellent visions to start with. Having delivered on time-bound transformational promises – 100% Neem coating of urea in 6 months, 20 Cr Jan dhan accounts in 4 months, six cr free gas cylinder connections in 5 years, 9 cr houses getting tap water connection in 4 years, 5k Jan Aushadhi centres in 5 years & 10k centres in 10 years, 12 cr toilets in 10 years, 18k villages getting electricity within 1000 days, three cr houses for the poor in 10 years – the list is still long. But suffice it to say that there is a proven track record of a speedy delivery of a promise made for finding a sustainable solution for the country in a time-bound manner!
With this clarity of a developed country by 2047, the game changer is the creation of DPI (Digital Public Infrastructure) – which has made India an inspirational country thanks to the Cowin platform for instance or UPI that has transformed the way people engage in petty commerce without hassles – the path is clear. More money being pumped as capex (last budget it was 10 lakh cr and this year further enhanced to 11,11,111 Cr) apart from the transformational Gati Shakti with a 100 Lakh cr capex in the plan – is the true game changer with capex multiplier helping the country’s economy to grow faster and sustainably. Note that no shortcuts are taken to take the country ahead. Hard choices, that are good for the country are embraced!
Continuity – Apart from political continuity – which the market most likely has factored in as BJP’s return to power with a bigger mandate in the elections – there is a need for policy continuity. And this budget very clearly demonstrates that feature. Promoting ease of living for the poor and ease of doing business for startups and businesses is evidently seen in the announcements. The good doctor has ordered a massive 1 lakh cr long-term loan at almost nil interest rates and cutting-edge research at startups! Not to forget the 75k cr reforms milestone linked interest-free loans for 50 years to states to transform their states – yet again, the continuity of vision for Viksit Bharat. The capex support for states becomes bigger with 1.3 Lakh Cr for 50 years at zero interest!
The biggest takeaway – is transparency. In an election year, when false promises are made with gay abandon by parties generally, the Finance minister boldly stated that a white paper would be soon tabled in the House. The paper speaks of how India had become a fragile 5 economy in 2014 due to bad policies and policy paralysis and how it has now transformed into the 5th largest economy in the world. And as the IMF said, this is a bright star in an otherwise gloomy global economy, sustainably growing at 7+%.
If the interim budget was the first part and the concluding part is the final budget in July 2024, the interesting part of the process in the middle will come via the White Paper. It will put the country’s earlier and current governance structure to the test in public and in black & white! Pun is very much intended!
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Dr. Samir Kagalkar (MA. Economics from Gokhale Institute of Politics & Economics) and holds. Ph.D. from IIMB in Corporate Strategy & Policy. He heads the BJP Economic cell in Karnataka.
