Sanjayovacha | Does Budget 2025 miss the woods for the trees? | Sanjaya Baru

It is a curious fact that many prominent and longstanding supporters of Prime Minister Narendra Modi’s government, in business, academia and the media, were seeking a “1991” kind of Budget in 2025. There was talk of the need for “big bang” reforms, even though Prime Minister Modi had often pooh-pooed such talk and was quoted as saying that: “When I came to the government, I used to sit down with all the experts and ask them to define for me what is the ‘big bang’ for them. Nobody could tell me.”

Not surprisingly, all the Budget speeches over the past decade have been about programmes and projects, and not about policies. Union finance minister Nirmala Sitharaman stuck to the knitting by presenting one more such statement to Parliament on Saturday. There was much table thumping about a major tax concession given to lower middle-class families, with the floor taxable income raised. This measure was clearly aimed at stimulating consumption in a subdued market.

Recall that over the past few weeks, several companies have been reporting a decline in consumption of consumer durables and non-durables. Given this context, some tax relief was expected and it could well boost consumption. However, the more serious and enduring medium-term problem facing the economy has been the stagnation in investment and employment. The Budget speech had little to say on either.

This is all the more surprising since the annual Economic Survey produced by the chief economic adviser to the Government of India had stated only a day before that: “Lowering the cost of business through deregulation will make a significant contribution to accelerating economic growth and employment amidst unprecedented global challenges.” How did the finance minister respond to this?

She has promised to appoint a committee that will examine the question and submit a report after one year! Standard government practice.

In fact, the reason why expectations of a “big bang” Budget were raised on the eve of Ms Sitharaman’s speech in Parliament was the tone and substance of the Economic Survey. The Survey identified very correctly the challenges the economy was facing both at home and abroad. The global environment has become challenging and the domestic environment has been less than encouraging.

Against this background, the Survey observed: “Underpinning specific policy efforts will have to be the philosophical approach to governance. ‘Getting out of the way’ and allowing businesses to focus on their core mission is a significant contribution that governments around the country can make to foster innovation and enhance competitiveness.” The Survey suggested that the most effective way in which the Union and state governments can do this would be “to give entrepreneurs and households back their time and mental bandwidth. That means rolling back regulation significantly. That means vowing and acting to stop micromanaging economic activity and embracing risk-based regulations. That means changing the operating principle of regulations from ‘guilty until proven innocent’ to ‘innocent until proven guilty’. Adding layers of operational conditions to policies to prevent abuse makes them incomprehensible and regulations needlessly complicated, taking them further from their original purposes and intents.”

It was such thinking that encouraged Prime Minister P.V. Narasimha Rao to accept wholeheartedly the advice given by the economist I.G. Patel to stage a “bonfire of controls”. What the chief economic adviser, V. Ananta-Nageswaran, was now advocating was a “bonfire of regulations”. At least a drastic whittling down. To refer this matter to a committee for relaxed consideration over a year reminds you of that one episode of BBC’s Yes Minister, in which the civil servant advises the politician that the best way to address a problem is to appoint a committee to examine it.

A “big bang” Budget is not just about tweaking policy here and there. It is one that alters what economists call “the state of expectations”. In 1991, when then finance minister Manmohan Singh told Parliament that the time had come for India to emerge as an “economic powerhouse”, and the P.V. Narasimha Rao government decontrolled and liberalised economic activity, they were altering the state of expectations. India moved from being an economy with an average rate of growth of 3.5 per cent (1950-1980) to record 5.5 per cent over the next decade and 7.5 per cent over the subsequent decade.

That is what is now needed, said the Economic Survey, when it stated that one cannot be satisfied with a 6.5 per cent rate of growth if the country aspires to be a developed economy, Viksit Bharat, by 2047 and that policy should aim for 8.0 per cent growth over the next two decades.

The success of Ms Sitharaman’s record in office will depend on and be judged by whether or not her budgetary and macro-economic policy statements year after year bear the promised fruit.

That the Union government chose to focus on sectoral tactics rather than on macro strategy in the Budget speech this year is baffling, though not surprising.

Having won the state Assembly elections in Maharashtra, that stabilised the Narendra Modi government, few expected a speech that would promise a students’ hostel and an airport for Bihar. A decade after launching the “Make in India” programme and failing to boost the share of manufacturing in employment, the finance minister has now promised to launch a National Manufacturing Mission. Yet another Yes Minister tactic.

What is truly troubling about Ms Sitharaman’s Budget speech is that the Modi government seems to be missing the woods for the trees. This was an opportunity to outline the government’s long-term strategy over the next five years for placing the economy firmly on a path to Viksit Bharat. A dramatic easing of business procedures, overnight reduction of the number of regulators a firm must deal with, outlining clearly the roadmap for decriminalisation of laws and so on would have unleashed the “animal spirits of enterprise” that Ms Sitharaman promised in 2019.

The fact is that Indian business has been sullen over the past few years. Few talk about it and the media largely remains circumspect, but private enterprise remains unenthusiastic about investing. There has been a flight of capital and capitalists. The number of young Indians going overseas is rising. Ironically, the Budget has removed the tax collected at source on foreign exchange loans used for securing education overseas! There is little in this budgetary policy that will encourage emigrating Indians to stay home, much less alter the state of expectations of those who remain home.

The writer is an author, a former newspaper editor and adviser to Prime Minister Manmohan Singh