He had all of 45 days, from being appointed finance minister, to presenting the full Union Budget for 2014-15 but Arun Jaitley showed glimpses of the kind of changes the present NDA government can bring to economic policy but disappointed many by staying away from big-bang reforms as they had expected.
In sum, he picked up the interim budget laid out by his predecessor P Chidambaram in February that year, whittled down some bits he did not agree with, added some of his own touch and presented a ‘UPA Plus’ sort of a budget.
So much that instead of criticizing it, as you would expect from someone who is now in the opposition, even Chidambaram weighed in saying it bore the UPA’s stamp.
Here’s where Jaitley’s budget was, in spirit, similar to Chidambaram's.
As some had expected, the budget did not dramatically alter the nature of “welfarist” schemes, such as those offering rural employment guarantee, food security or fuel subsidies, which the UPA had come to be associated with, with some notoriety.
While this would have come as some disappointment to free-market economists, who were batting for a more hands-off government, Jaitley did bring in some changes, such as announcing a tweak in the rural employment guarantee scheme to make it more asset creation-focused and constituting an expenditure management committee to look into how subsidies could be rationalized in future.
Jaitley also doubled down on schemes that the BJP had, to some extent, opposed when the Congress was in power, such as the Aadhaar, and provided Rs 2,000 crore for it.
On the macro-economic front, Jaitley also announced he would meet Chidambaram’s fiscal deficit target of 4.1 percent, even though that target had earlier been rubbished by critics as unrealistic and unachievable, except by resorting to financial jugglery. (A later meltdown in international crude prices, though, has appeared to have come to Jaitley’s rescue.)
But the budget still differed from the Congress’s in many ways.
For one, in line with the Modi government’s agenda, it laid a greater focus on the boosting infrastructure spending. Among the many initiatives announced was the proposal to set up an online, one-window clearing agency for projects, tweaking bank norms to lend to the sector, as well as announcing an institution, at the cost of Rs 500 crore, to streamline PPP projects.
As well, Modi’s pitch, given his experience as chief minister, has always been to provide a greater say to states on matters of decision making.
As a result, a clear push towards fiscal federalism was obvious with Jaitley throwing his weight more behind schemes that are funded by the centre but implemented by states (from 26 percent of total plan expenditure in the interim budget to 59 percent).
The disappointment over lack of big-bang reforms stemmed from Jaitley’s decision to not announce a greater focus on privatization (though the FM did lay out an ambitious divestment target), not effort to incentivize more FDI (it was increased for insurance and defence but even in these two, control was insisted to wrest with Indian companies) and no firm announcement to roll back the infamous retro tax UPA had announced in 2012 (Jaitley only resolved the government would not ever touch it except in the “rarest of rare” cases).
The FM, though, had a lot for the common man, increasing the income tax exemption limit to Rs 2.5 lakh (from Rs 2 lakh) and upping the 80C exemption limit to Rs 1.5 lakh (from Rs 1 lakh).
On the whole, it had something for everyone: not so radical so as to invite the ire of the Left and Congress (whose support the BJP would still need given its minority status in the Upper House) but recalibrating the fiscal needle enough so as to push the economy towards a free-r market, higher-growth path.