India’s Budget: competent but uninspiring

The major surprise coming out of India's 2014 Budget, delivered last week, was…well…that there were no surprises.

After the landslide victory of Narendra Modi's Bharatiya Janata Party (BJP) in May's General Election amid talk of new directions and national rebirth, many Indians had been expecting a Budget to match.

Instead, Finance Minister Arun Jaitley delivered a comprehensive and competent account of the nation's current financial standing; outlined the problems it faced, and produced a hard-headed vision of the way ahead. It wasn't quite the hangover after the party, but the Budget did provide a large dose of reality.

Having said that, the stock market was happy, the aspirational middle classes thought Jaitley's measures were quite reasonable while business and industry generally gave it the thumbs up.

So no fireworks, but a close reading of the Budget papers does reveal that most of the BJP's election promises are there, if only referred to briefly in Jaitley's speech to the Lok Sabha (Lower House of Parliament).

What the Finance Minister did dwell on was "fiscal prudence". He spoke at length about the need for the country to live within its means in order to tackle the "challenging" situation left by the previous Congress-led Government.

He raised limits on foreign investment in the defence and insurance industries from 26 per cent to 49 per cent - a clear sign that India wants more foreign investment (as well as a stronger military) and set a fiscal deficit target of 4.1 per cent (down from the current 5.2 per cent).

He promised that a goods and services tax - something that has been talked about in India for years - would be finalised for a vote in the Lok Sabha by the end of the year. He foreshadowed a major assault on taxation loopholes and those who simply neglected to fulfil their tax obligations.

It was all good solid reasoning though the rhetoric was under-stated. Even so, many of the highlighted campaign promises were referred to: a major boost to education; a plan to build 100 'smart' cities and a massive infrastructure program - "this Government will build 23 kilometres of new highways ever day"- brought an enthusiastic reception from the Government benches.

So too was the BJP election pledge to provide electricity and sanitation to all homes by the end of the decade. However, Jaitley refused to dwell on these proposals, stressing his first task would be to restore the Indian economy to the vigorous health it once enjoyed - boosting growth from its present anaemic rate of 4.7 per cent and attacking inflation, which has averaged more than nine per cent over the past two years.

His speech was in contrast to that of Railway Minister Sadananda Gowda who presented his Railways Budget two days earlier. It is a measure of the importance Indians attach to the rail network that it gets its own separate Budget announcement.

Gowda foreshadowed a raft of measures, led by the announcement of the nation's first bullet train line between Mumbai and Ahmedabad. More trains on the current over-stretched network, a clean up of the nation's main stations and free Wi-Fi for travellers were the other main points.

Commenting afterwards Prime Minister Modi said the Budget marked an end to the previous "disorder" in railway planning which had been done in "bits and pieces".

India's State-owned railways are the fourth largest in the world, but have suffered from years of low investment and populist policies that have kept fares low. Patronage is enormous, with travellers who could not get a place inside carriages often hanging from the sides or sitting on the roofs, but the system has been loss making for decades.

As a result the once mighty railway network- the pride of the British Raj - has become a slow, badly congested system that is a brake on economic growth.

All of which left commentators wondering whether Jaitley could have been a little more visionary in his own statement. N.K Singh, a former BJP member of the Rajya Sabha (Upper House) asked whether the Finance Minister, whose team worked feverishly to present the Budget on time, simply got bogged down in the details.

"Is the budget riddled with too many details which obfuscate the big picture? Could more timelines have been given for the multiple initiatives mentioned in the Budget and the fiscal strategy more comprehensively crafted? Has enough been done on retrospective taxation? Has there been a failure in managing the expectations and aligning them with contemporary realities?" Singh asked.

Columnist Sanjoy Narayan, writing in theHindustan Times, said the Budget had left him unsatisfied. He thought that since the voters had given the BJP such a strong mandate, the Finance Minister could have done a bit of grandstanding, highlighting a couple of attention-grabbing measures and reaping the benefits of "making it a memorable Budget that would spread good cheer and sentiment throughout the nation".

"The markets would have gone cock-a-hoop; foreign investors may have started a queue; and, best of all, the new Finance Minister would have been a rock star," Narayan wrote.

However, as Australians know very well, rock stars do not always make the best Ministers. What Jaitley has done is craft a responsible Budget, tailored to India's current unenviable financial position, just 45 days after assuming the office.

The headlines are probably best left to Modi who as this is written, is attending the Brazil- Russia-India-China-South-Africa Summit of emerging regional powerhouses in Brazil.