For a few rupees more

On the fourth day, the Budget began to look really good. That day - March 4 - was when Raghuram Rajan cut rates. The Reserve Bank Governor had made it very clear that he would not tamper with the rates unless the Budget gave him enough reasons to do so. And he is a man known to walk his talk.

Rajan must have seen some of what was lost in the usual post-Budget din. As has become de rigueur, most people gave it high marks but began to list what it lacked the moment the cameras and recorders were turned off. That's one of life's delicious ironies: a vaunted lawyer like Finance Minister Arun Jaitley did not do a stellar job of selling the Budget, even though he did put in much in it.

Or maybe it was because of the unprecedented build-up of expectation. The Finance Minister, armed with a monstrous majority in Parliament and a historic low in global oil prices, will - they thought - turn water into wine.

EDITOR'S TAKE: There's a lot to like and admire about Budget 2015

They ignored two things. First, there was not enough water left with him despite the oil bonanza. A shortfall in revenues, high interest payments, high revenue deficit, more devolution to states, and a pressing need to increase public spending on infrastructure took care of that. There may have also been an inner voice - and some outer ones in the party, one might add, in the aftermath of the Delhi elections - telling him to shed this image of being pro-corporate and not so much pro-poor.

Secondly, why would he get into this wine business? He used the phrase "accounting exercise" in the beginning of his Budget speech. Yet, he went beyond it to give some clear signals.

A Budget for all?

The Narendra Modi-led government's first full-year Budget lays down the vision for at least the next five years. It talks about the government taking ownership of building roads and highways, reduction in corporate tax, a new bankruptcy code, a roadmap for GST, substituting wealth tax with a 2 per cent surcharge on the super rich, and an innovative gold monetisation scheme.

But wait a minute before you cry pro-corporate. The embers of the disaster that was India Shining in 2004 haven't died out. They have only got reignited with the Delhi results. To be considered a party for the wealthy continues to be suicidal in a country a third of whose very large population lives in extreme poverty.

Perhaps that can explain why a party with this kind of majority refused to touch the holy cow of subsidies. Indeed, it makes a virtue out of its resolve not to lower their level. Still, the Budget goes a long way to reform the subsidies system by making it ride what the Economic Survey called the holy trinity of JAM. That is Jan Dhan, Aadhaar, and Mobile. Together, they can help plug leakages and corruption, and make sure the subsidies reach those they target. That is a clear departure from the UPA's mindset of entitlements.

There is more. The Budget has a social security net for the poor, health and accident insurance and a pension plan, recognition of the unorganised sector, and increased allocation to MNREGA despite the Prime Minister's scathing criticism of it just the day before. Here the signals get a tad mixed, as the Budget reduces spending on education, health care, and agriculture.It could have also done well to stick to the fiscal deficit target of 3.6 per cent for the next financial year, instead of letting it slip to 3.9 per cent. The slippage may have sent confusing signals about the government's intent to follow fiscal discipline.
Unfortunately, this comes at a time when the international investor community is watching India's every little move and trying to see how credible the revised GDP growth numbers really are. According to Ruchir Sharma of Morgan Stanley Investment Management, they are actually laughing at this bad joke, but let's not go there in this article.
As Jayant Sinha, Minister of State for Finance, says so eloquently in an interview with us, this government brought a true fiscal deficit of more than 5 per cent down to 4.1 per cent. Surely, it could have pulled in 30 basis points.

Budget misses

Worse, it did not use that extra bit of elbow room to increase plan expenditure, or the productive expenditure. Instead, as the UPA's finance minister P. Chidambaram points out with great relish on these pages, the plan expenditure has gone down.Also, the fact that allocation to agriculture declined from 9.5 per cent of the total development expenditure in 2013/14 to 2.7 per cent in 2015/16 could be a cause for concern, since, as the Economic Survey admits, growth last few years was domestic-driven. The major driver of domestic demand has been coming from the rural areas, which are getting hurt by a decline in agricultural growth.