We all knew it wasn’t going to be easy. Union finance minister Arun Jaitley had to come up with a budget that would be both a ‘thank-you-voter’ act and a trailer to a grander economic overhaul that India Inc and investors would like to see this government usher in.
The lawyer-turned-politician appears to have made a good beginning, but the road ahead could be long, one that he will be able to traverse only with visionary thinking and political will.
In offering relief to tax payers, slashing duties on goods that the urban middle class aspires for, setting aside funds for entrepreneurship and smart cities, among others, Jaitley has sought to deliver on Prime Minister Narendra Modi's promise of acche din.
The problem with inflation in our context is that it is driven much by supply side constraints and pass-through effects of global crude oil and commodity prices that are beyond the control of a finance minister. In his budget, Jaitley has proposed a price stabilisation fund for farm goods — a good idea, which is yet to be tested. The biggest risk to inflation, however, lies in a possible monsoon failure that we may be staring at soon. In other words, the extra money that the finance minister has sought to leave with the salaried class by increasing the tax exemption limits could just go in paying more for food.
As for jobs, the budget rightfully places a lot of emphasis on skill development — an issue that Modi is focused on. The proposals to set up a Rs. 10,000-crore venture fund for micro small and medium enterprises, technology start-ups and similar funds for rural entrepreneurs are welcome moves. But these are initiatives which will take time to have their impact.
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