Phew! Most will agree that was probably the best feature of the Budget presentation. Since the demonetisation Dhamaka and NaMo’s December 31 speech kicked the wind out of business confidence, entrepreneurs and corporates have been bracing for more uncertainty. Private investment has been driven to near zero, and this steady-hand Budget was sorely needed to restore confidence. Hopefully, we’ll inch our way back to normalcy soon.
The increased spend on infrastructure, rural economy, housing and agriculture will all help in ameliorating the hit that the economy has taken over the last few months. This Budget has followed through on several initiatives and preserved continuity.
I see this Budget as one more step in a sequence of moves. I think you can see the silver lining if you stop looking at demonetisation in isolation — combine it with announcements on cash ban, the signalling around data mining of the cash deposits to expand the tax base, the reform in electoral funding and the firmness around the GST deadline.
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Pull back a bit more and throw in the fact that Aadhaar and JAM have been pushed through, that BHIM, UPI and DBT are being propagated and digitisation of government records and contracting is on top of the agenda.
Some may argue that these moves haven’t been perfected yet, there are security and privacy concerns. But well, we know how haphazardly our drunken Indian elephant dances. We will find our way but not before we’ve bruised ourselves a bit. The sum total of these moves is quite interesting — their collective impact can be dramatic. Let’s see why:
We call ourselves a nation of millions of entrepreneurs, but in reality we are a nation of millions of “arbitrage entrepreneurs” — they run sub-scale, under-capitalised firms that survive on tax arbitrage and flouting of regulations. For far to long, Indian entrepreneurs have resorted to ‘jugaad’. Jugaad with the inspector, on paying below the minimum wages, on manufacturing in an unlicensed, unsafe premises, on under-invoicing, over-invoicing… Name it and they found a way to beat the system.
Can these moves converge and move us from a low-trust, low-velocity, high-friction economy to a trust-based, transparent one? With more accountable businesses and entrepreneurs, easier access to capital and lower transaction costs. If that ‘jugaad’ mindset is killed — it’ll be very positive on many fronts.
We need many more changes — in our ease of doing business, archaic web of regulations and resolution mechanisms. Normally these resets take place over decades. But if the series of tiny shocks could lead to behaviour change, it could be the end of ‘jugaad’. And we may see a new India in a few years.
Partner, True North
(Formerly India Value Fund Advisors)