What's Worth Noting In Nirmala Sitharaman's Budget

The first hour of Finance Minister Nirmala Sitharaman's budget speech presenting had one significant omission: any actual budgeting. There were barely any numbers in it. Instead, it was a lengthy medley of policy priorities, praise of the government's record, and quotes from Mahatma Gandhi and various spiritual leaders. But she didn't bother to tell parliament or the watching nation - not to mention investors - how much she intended to spend, and on what. Even more oddly, the single most watched number of any budget presentation - the Finance Ministry's target for the fiscal deficit as a proportion of gross domestic product - was tacked in almost as an afterthought, after the budget speech had formally concluded.

I'm not sure whether this is a sign of great confidence, or of the lack thereof. Perhaps Prime Minister Narendra Modi's government, fresh off a resounding re-election victory, feels it owes less than ever to the kind of person who cares about budgetary allocations or deficit projections. Or perhaps, in keeping with its attitude to data and statistics more generally, it doesn't want to make it easy for people to evaluate how well its actually doing its job.

The annual budget exercise in India is far more consequential than its equivalents elsewhere. It's true, however, that this is because it is more than a mere statement of accounts. The Indian government's ability to influence the broader economy, for good or ill, is so vast that the budget speech sets the tenor for market sentiment; it serves also as a general statement of what the government's priorities are, and how it intends to go about them. So from that point of view, I guess I understand Sitharaman's decision - why not just drop all that pesky accounting and those boring numbers altogether and focus on the good stuff? Marketing is the government's forte, after all.

But even judged purely on its ability to message the Modi government's intent, I am not sure it succeeded. Many hoped that now that he was re-elected, Modi would finally unleash "big-bang" structural reform. There were many welcome policy initiatives announced through the speech - but what it failed to provide was a coherent message of how the government views the Indian economy's current slowdown - and its way out of it. This is a pity, particularly because the government's own Economic Survey, released as is traditional the day before the budget speech, did indeed provide a coherent roadmap. The survey argued that the government had to focus on re-energising private investment above all, and that a pre-requisite for that was administrative reform and an "aggressive exports strategy". But this sensible advice was ignored in the budget - which instead furthered India's recent turn to protectionism and autarky by raising tariffs on a range of goods, including some intermediate goods.

Interestingly, this is one of the few budget speeches to not begin with a long list of promises and disbursals to farmers. Of course farmers were in there - but they were third on the list, behind the transport and financial sector. That's an interesting choice - the interim budget was entirely about farmers and the poor, and this one front-loaded measures to shore up troubled finance and invest in infrastructure. It's possible the fact that there's been an election in between those two speeches has something to do with the change.

That section on financial sector measures was interesting: it showed a level of competence and domain expertise that few generally associate with the Modi government in this realm. Perhaps, as the Finance Minister insisted, the broad consultative process for the budget actually worked well this time. Or perhaps there is someone in the Finance Minister's team - the new Chief Economic Advisor, perhaps - who has brought a much needed level of technical expertise into the the budget-drafting room. Either way, it is so different from the five years that have gone before that it is worth remarking upon. Or perhaps it is just that now that the election is over, we can finally focus on India's slow-motion financial crisis - "suit-boot" messaging is no longer relevant.

In the end, a budget will be judged not by its message but by whether its numbers stand up to scrutiny. Sitharaman met her fiscal deficit targets through a sleight of hand - the interim budget projected GDP in current rupees would grow by 11.5 per cent, and she raised it to 12 per cent. This is in spite of the fact that GDP data released since the interim budget showed the economy slowing further, not speeding up. There are other land mines buried in the budget's actual numbers as well, some of which might well come back to haunt the Finance Minister next year. But that's next year's problem, isn't it?

(Mihir Swarup Sharma is a fellow at the Observer Research Foundation.)

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