Public spending to safety net: The right noises without the big bang

READ: No change in personal income tax; FM Arun Jaitley levys 2% surcharge on super rich

With these measures, Jaitley expects the economy to grow at 8-8.5 per cent in 2015-16 on a new base announced this year. Higher growth will, in turn, boost revenues, providing him more resources for Prime Minister Narendra Modi’s flagships such as Swachh Bharat, Digital India, Beti Bachao and Smart Cities projects.

His growth story, however, will be put to the test because the budget size actually shrank, with Plan expenditure — seen as most productive — for next year pegged lower than that for this year. He has projected an almost 16 per cent increase in gross tax receipts for 2015-16, which is quite ambitious, given that his collections this year do not represent even a double-digit growth over the previous year.

Jaitley expects fresh disinvestment to contribute Rs 41,000 crore next year, which again is not quite aggressive, seen purely from a resource-raising perspective and the backdrop of a buoyant stock market.

READ: Union Budget 2015: 3 pct fiscal deficit in 3 years will help growth

Despite the phenomenal mandate in the 2014 Lok Sabha elections and the political space that it created for his Government, Jaitley didn’t risk cutting subsidies. On the contrary, the scale of the Delhi defeat seems to have forced the NDA to go on the backfoot on reforms and be clearly seen as rolling out schemes for the poor (the word ‘poor’ figures over a dozen times in his speech): a new financial institution Mudra Bank to fund small enterprises by dalits and backward classes, a string of sops including insurance.

A significant announcement was Jaitley’s proposed law to tackle black money. Imprisonment of up to 10 years and 300 per cent penalty on tax, for concealing income or assets abroad, got the corporate sector worried particularly given the discretionary powers India’s taxmen enjoy.

READ: Budget 2015: 15 key highlights of FM Arun Jaitley’s speech

This along with the Benami Transactions (Prohibition) Bill to check the circulation of black money in the domestic economy would be introduced in the current session of Parliament itself, he said.

For the middle class below a threshold income, he has proposed that EPF contributions be made optional. He has linked personal tax incentives to savings by increasing deductions to pension schemes to Rs 1.5 lakh from Rs 1 lakh now. He has allowed a higher deduction of Rs 25,000 towards premium for health cover, and also let salaried individuals avail an higher deduction of Rs 50,000 for New Pension Scheme. He has, however, hiked service tax to 14 per cent, which will make everything that bit expensive for the middle class. His tax proposals expect to net him an extra Rs 23,383 crore.

Politically, for the BJP, the budget made the right noises. It promised special assistance to poll-bound Bihar and West Bengal on the lines of Andhra Pradesh so that they grow faster. It also taxed the super-rich more with an additional 2 per cent surcharge on those who earn over Rs 1 crore a year.

For reviving growth, PSUs are expected to hike their capital spends by 28 per cent or almost Rs 70,000 crore. Besides this, the finance minister has allowed for funds to be raised through tax-free infrastructure bonds for road and rail projects. In addition, he has announced a National Investment and Infrastructure Fund which will be assured an annual flow of Rs 20,000 crore.

Jaitley has also proposed a new bankruptcy law — hopefully on the lines of the Chapter 16 code in the US that allows for seamless foreclosures by lenders.

Clearly, the Budget had set up huge expectations raising the bar. “People who urge us to undertake Big Bang Reforms, also say that the Indian economy is a giant super tanker, or an elephant.  An elephant, Madam Speaker, moves slowly but surely,” Jaitley said towards the end of his 90-minute speech.

He has moved surely, but slowly.