What Swaminathan Aiyar said was a valid, reasoned opinion, albeit somewhat different than my own impression of the Budget as the best, content-wise, in the last two decades. I had also mentioned in my Budget review article (From hope to reality, July 10, goo.gl/Q3Gj7V), that, in the monotonous delivery and in the preoccupation with minutiae, the Budget seemed to be nondescript and certainly not revolutionary. However, while the devil in the Budget was in the details, the angel of reform was there, in abundant display, in the content. Just look at the evidence.
What every reform commentator has been crying hoarse about for decades is happening. A big step has been taken by the Rajasthan government (a BJP enclave) to reform labour laws; however, the reformed laws should not have prevailed even in India of the 1960s. Such reforms still have a long way to go, but considerable progress has been made from the original labour laws from 1860 conscientiously followed so far by every Indian government. Haryana (Congress-ruled) has now joined the movement to make our draconian labour laws only effective if the firm has 300 employees. This is not reform, but significant progress from the previous mindless law which stipulated state intervention for firing of workers if a unit had more than hundred workers.
Land acquisition reforms
State governments are now getting together and collectively demanding that the Neanderthal land acquisition law, passed by all parties, be changed to something that the people of India want, and not what the entitlement-advocating, socialist Congress brigade wanted. This could be a game-changer.
Suddenly, unlike with the Sonia Gandhi-led government, the previously not possible is now feasible and likely. The much-needed and overdue Goods and Services Tax is likely to be in place by February 2015, and it is very likely that the overdue reforms for personal and corporate income taxes will also happen by then. Don't be surprised if corporate taxes are also reduced and cesses and surcharges become part of (bad) Indian tax history while the irresponsible Corporate Social Responsibility Act is either significantly reformed, or junked altogether.
This is a large and important sector where the heavy hand of the government has been the most-present, and the most-damaging. This sector has been unreformed for 65 years; indeed, by the mix of policies pursued, it has been the sink for all the anti-rational and anti-farmer and anti-poor policies one can think of , and then more. There is great hope and expectant reality that, whether it is the price stabilisation fund or the reform of the APMC market (essentially allowing the farmer to sell his cereals and fruit and vegetables to anybody he chooses to and at whatever price) or the gradual dismantling of the regressive Food Corporation of India, agriculture will see the largest set of reforms in the near future.
Reform of how we do not transfer incomes to the poor
We have more schemes to help the poor than the number of really poor districts. PM Modi has endorsed Aadhaar to more effectively identify the poor and deliver targeted income support to them. A complete overhaul of subsidy policy should be in place by next February.
Not a part of the Budget, but definitely the concern of the people, and the government. Just yesterday, health minister Harsh Vardhan endorsed the drive to make homosexuality legal, i.e., advocated the repealing of the archaic and anti-human (and just as old as our labour laws) Section 377 of the Indian Penal Code, which criminalises homosexuality.
If there is so much reform that will happen, why did the BJP chose the path it tooka path of obfuscation, of diversionary tactics (numerous allocations of R50-100 crore, etc)in the Budget The party might have done so in recognition of the defeated. The Congress and the Left (or rather, what's left of it) opposition so loves rhetoric, as witnessed by their own policies over the last 60 years, that the BJP decided to give them what they are used torhetoric. The Congress was very pleased that their accounting gimmickry on the deficit was not revealed in all its gory detail, and that the deficit was kept at the UPA magic figure of 4.1% of the GDP.
Note that the deficit is not at 4.1% due to increased expenditures or due to higher rates of taxation; indeed, the effective rate of income tax has declined. The deficit is targeted at 4.1% with the sale of family silver that the political opposition thought the BJP would never do; rest assured, if the government does fall short of the target, they will make it up by selling more of the family silver.
There is historical precedence to what the BJP is doing. The headline of today's column references former US Attorney General John Mitchell's comment on the then new Nixon administration policy on civil rights. The year was 1968, and the US had recently embarked on a comprehensive forward reform path on desegregation. But the US population, and especially the opposition Democrat component, was apprehensive that the new Republican, and presumed anti civil-rights, right-wing, presidency would not take the process forward. They did. And the same is very likely to happen in India; this can easily be inferred from the acts of commission by the BJP government prior to the Budget, and reform acts likely, as documented above, post the Budget. At this pace, count on 2014 being remembered as the year India comprehensively changed course for the future, and for the better.
And 2014 will prove the old adage (if there isn't one, then there should be one)those who talk the most about helping the poor, or being secular, or being holier than thou, do the most for themselves and the least for others. Oh yes, there is a sayingthe path to hell is paved with good intentions.
Can you now name one critic, or even one supporter, of the BJP who would have predicted that they would act on not one, but several economic and social reforms So just be careful when you say either that the Budget was a disappointment, or that it was not reformist, or that there is not much difference between the UPA and Modi's BJP other than their lipstick!
The author is chairman, Oxus Investments, an emerging market advisory firm, and a senior advisor to Zyfin, a leading financial information company. Twitter: @surjitbhalla