Hope vs Expectation

In the first two Budgets he presented after the NDA government led by Prime Minister Narendra Modi came to power, Finance Minister Arun Jaitley trod a cautious and conservative path. In the first one, he did not have many options perhaps - the government had been formed in the middle of the financial year, and the Budget had to be presented within a fairly short period of his taking charge. He largely stuck to the line of thinking that had been outlined in the Vote on Account earlier in the year by his predecessor P. Chidambaram of the UPA government.

However, when he rose to make his second Budget speech on February 28, 2015, there were many expectations that the finance minister would present some truly pathbreaking proposals or unleash a lot of new initiatives to boost the economy. The time seemed right to do so. The finance minister had been on the saddle for nine months and had sufficient time to study and understand the problems in the economy. The Central government was still in its honeymoon period, and there were enough tailwinds in the Indian economy. Crude oil prices kept sliding, giving the government more ammunition to its import bill, narrow the trade deficit, and generally raise some additional revenues. The slump in crude and other commodity prices was also helping inflation come down.

Unfortunately, the second Budget also remained much on the beaten path. While most businessmen and some economists praised it in public, many of them in private conversations admitted that Jaitley had squandered a golden opportunity to do more about subsidies, spur growth or help improve social indicators such as education and health. Still no one had any serious problems with the Budget. In fact, the basic economic ideas of its predecessor, the UPA government, were considered sound, in general. The problem with the UPA government that had been voted out, as many business and financial leaders agreed, was not in its ideas but in its implementation and in the corruption allegations that plagued it. So, for a government to continue with those ideas while improving on the implementation would do much for economic growth, was the general consensus. And the feeling was that the prime minister was a master of implementation and he would straighten the kinks in the system.

As he prepares his third Budget, Jaitley has to contend with more problems perhaps than he would want. Despite India's September quarter GDP growth rate being clocked as 7.4 per cent, many of the leading macroeconomic numbers - from exports to capital spending by corporates - is down. Revenues in a host of industries are down, though profits have been maintained through cost-cutting. But cost-cutting is never an ideal option because it invariably involves reduction in employment, and that in turn reduces consumer spending.

There are other problems as well in the overseas markets, and the finance minister cannot depend on a booming global economy coming to the rescue of the domestic economy anytime - at least not for a couple of years.

There is also a sense in the corporate world that the government has not been as successful in implementation of many programmes on the ground as it should have been. And in Parliament, it has hit a logjam despite enjoying brute majority in the Lower House. Indeed, some of the most crucial economic bills it has introduced have been successfully stalled by the Opposition.

Will this be another conventional Budget or a bold one where radical ideas are introduced? Most people expect the former but hope for the latter. Many finance ministers perform best when they face a challenging external situation. Everyone is hoping that Finance Minister Jaitley is one of that breed, though expectations in general are muted.