Having got back from the lacklustre match between Argentina and Netherlands in the second semi-final match of the Fifa World Cup 2014, I just watched finance minister Arun Jaitley’s maiden budget speech on television in my hotel room in Sao Paulo. And I must say I was impressed with what I saw.
I know that some of the economists and my fellow corporate leaders have expressed their disappointment over the lack of any big-bang reforms.
However, considering the new leadership barely had 45 days to prepare the document, I feel the new finance minister has done a commendable job. What is missing by way of an overarching vision has been compensated by an ample dose of earnestness, credibility and practicality.
To my mind, there were six earnest attempts by the finance minister, and all of those were designed to create more traction and space for growth.
First, the minister has loosened the purse strings to boost public investment, especially in infrastructure; I especially liked the focus on rural roads and highways; this was the game-changer for the NDA government between 1999 and 2004 and the refocus after 10 long years is hugely welcome.
A similar focus on real estate financing, low-cost housing, port development and allowing banks to fund infrastructure is equally welcome because of the ability to create jobs and create a cascading effect across user industries.
Second, he has treaded carefully on subsidies — no drastic cuts despite calls to bite the bullet; clearly, the leadership wants to show an economic uptick before it produces the bitter pills.
Third, the budget was an earnest attempt to resuscitate an investment-starved manufacturing sector by increasing foreign direct investment in defence, and by making it possible for a large number of SMEs to gain tax benefits from their investments. The capital subsidy threshold of Rs 25 crore should benefit the value chain in our own two-wheeler industry.
Fourth, Jaitley has sought to be realistic about the fiscal deficit target — the finance minister began his speech by referring to the target set by his predecessor as an aspirational target.
Chidambaram, on the other hand, often spoke of the fiscal deficit target as sacrosanct and ensured the deficit didn’t cross the red line by simply compressing spending towards the end of the year. However, putting curbs on legitimate public expenditure is clearly something Jaitley seems unwilling to do.
Fifth, the budget was also a modest attempt to support financial inclusion and encourage savings amongst the lower middle class.
Finally, for the first time there was a conceivable attempt to strongly back start-up entrepreneurship by setting up a Rs 10,000-crore risk fund.
At last, there seems to be some realisation that the latent potential of the Indian entrepreneur and the would-be entrepreneur needs to be unleashed, with full government backing and encouragement.
I had two other takeaways from the speech. First, as a seasoned lawyer, Jaitley’s attention to detail was quite evident. There was also a clear Modi-touch in that many initiatives were taken from a bottom-up perspective.
Of course, there were the usual attempts at grandstanding: Ganga cleansing, Madrasa reform and more money being spent for a statue of Sardar Patel than for women’s safety, but then, no budget in the history of India has escaped from the clutches of populism, and it was unrealistic to expect that this one would be different!
Some red flags are also being raised about whether the finance minister will be able to meet the 19 per cent increase in tax revenue that he’s set himself for the year, given that growth is chugging at 5 per cent.
But for a difficult job that had to be done in a hurry, Jaitley has drafted a reasonable - albeit inexorably long - first cut. I look forward to his second cut in February.
Hopefully, by then, the speech will be taller on execution and shorter on words.
Munjal is managing director & CEO, Hero MotoCorp Ltd