Arun Jaitley had 282 on his side. He has lost the opportunity
Perchance, because the Budget was presented on Saturday, I can follow up on the column “What will the FM do with 282?” published last Sunday.
I had laid down three crucial tests. Let us see how the finance minister fared on those tests.
First, the test of fiscal consolidation. The target of fiscal deficit was 4.1% in 2014-15, which he has achieved. It was 3.6% for 2015-16, which he has stretched to 3.9%, quite unjustifiably. The target of 3% was set for 2016-17, which he has now pushed back by a year. Even two weeks ago, Mr Arun Jaitley stood by the agreed path of fiscal consolidation. The Economic Survey reiterated the commitment. Yet the government has gone back on its promise. The slippage will not go unnoticed and it may prove costly.
What is worse, the additional borrowing of R37,500 crore (0.3%) will go entirely into Non-Plan expenditure.
The second test was the test of equity. Equity, in a developing country with a large proportion of poor people, is served by well-designed and adequately-funded schemes and programmes. Shockingly, allocations have been cut from the levels of the budget estimates (BE) and revised estimates (RE) of 2014-15. Programmes under the ministries of agriculture, labour and employment, rural development, social justice and empowerment, minorities, environment and forest, and culture have been given reduced allocations in the BE of 2015-16.
The third test was the test of rising inequality. In the view of this government, there are corporates. There are income-tax payers. And there are others. Corporates will get a relief of R20,000 crore every year over four years beginning 2016-17. In the fourth and last year, the relief will be R80,000 crore. Income-tax payers will get the benefit of higher deductions and hence lower tax liability. And the “others” will pay higher excise duty and higher service tax.
Mr Jaitley had a Victor Hugo moment. He had 282 on his side. Both the number and the moment have been wasted.
P Chidambaram, Former Finance Minister