Traditionally in a election year Budget, the politics of economics and the economics of politics converge with a clear eye on the electoral ground. So, I guess there were expectations for a similar encore. However this year’s interim Budget was crafted with the art of long view: Setting directions rather than milestones, upscaling the dream to think big and differently and drive the impetus to execution. Perhaps the political confidence has driven the thought process of the government to develop the interim Budget as an interim flag post in a long journey.
That the next decade in India will be a period of building the hard infrastructure is now well accepted, and hence not a surprise at the higher capital allocation with capex outlay increased by 17% over the revised estimate. The government’s focus on the rural sector and higher allocation not only on rural housing and focusing on the middle class living in rented accommodations and encouraging them to build their own is laudable and helps the middle class dream.
One of the most striking and critical elements of this interim Budget has been the allocation of Rs 1 trillion for innovation funding. Funding innovation is always risky yet so critical to building future resilience of any economy. By coming to the front and taking the lead in giving impetus to innovation, research and collaboration, the government has given a clear signal that it is ready to take the risk and set the standard higher for meaningful research and innovation. One would keenly look forward to the process of the allocation of the funds in this space where there is a huge opportunity given the intellectual power that the country possesses.
It was also heartening to hear about the deployment of the strategy on decarbonisation and climate change with a clear focus and very meaningful policy steps on coal gasification, clean energy and rooftop solar. Public spending on infrastructure, decarbonisation and innovation not only helps in pushing the Build India agenda, but also gives confidence to the private sector to invest in building capacity for the growth of the country. As the country chugs along with a 6-7% growth range in the next decade, there will be a need for capacity growth in domestic industry which will have a multiplier effect across the country.
The macro picture doesn’t look pretty and the fiscal deficit has expectedly grown to 5.8% on revised estimate. The aspiration to bring the deficit at or under 4% in two years demonstrates the intent and will help balance the external communication with, say, rating agencies. But, in reality, with a large infrastructure capex pipeline and social spending expected over the next decade, achieving this target will be a challenge. I feel that’s alright — so long as good money is spent on good productive projects and purpose, we can afford some space because when the economy reaches a certain size and the society uplifts itself to be more productive, it will auto generate the required headroom. We should keep a hawk eye to ensure we are consciously driving the process rather than let the balance sheet run away untamed. One key aspect to balance the books will be to control the revenue spending and while the direct and indirect tax regime has been materially untouched for now, a growing fiscal deficit will compel a relook at such a stand in the future.
I always felt that beyond the submission of the financial numbers and fiscal performance of the government, the annual Budget should be directional in nature and essentially a non-event. The interim Budget demonstrated that this indeed can be the case. Whether this will be the trend or a one-off needs to be seen.
Koushik Chatterjee
Executive Director & CFO, Tata Steel
(Views expressed are personal)