The Incremental Budget

The short-term idea the government had come up with just before the election was to directly give Rs 6,000 to each land-owning farmer in three tranches in a year

Finance Minister Nirmala Sitharaman's Budget could have unveiled bold policy visions of the Narendra Modi-led NDA government's second term. It missed the opportunity. Instead, it stuck to incremental changes and trod the same path as the Budgets of the past five years.

Going up to the Budget, the problems with the economy were fairly clear. Economic growth had largely been held up by government spending and private consumption. But even private consumption was showing signs of flagging. The other two engines of growth - exports and private investment - had been anaemic throughout five years of the preceding government. Agricultural and rural distress was widespread because farm incomes were stagnating in real terms and farmers were hit both when they produced less because of vagaries of the climate as well as when they had bumper crops (because of prices crashing). The short-term idea the government had come up with just before the election was to directly give Rs 6,000 to each land-owning farmer in three tranches in a year.

However, everyone recognised that this could not be a long-term solution. The profession of farming itself had to be made remunerative for the small and marginal farmer and that meant structural changes. The other big problem was that job creation lagged way behind requirements and this could create social tensions going forward. Finally, the financial sector was in a bit of a mess. Sitharaman had some constraints in tackling these problems - because economic growth was flagging and there was a great tax shortfall from original targets. So new ideas for raising revenues had to be found while becoming more prudent and efficient in terms of expenditure.

The great advantage the new finance minister had was that the government had returned with a thumping majority, and she had the space to take tough decisions for the long term. The Modi government also had some excellent economists with good ideas on board - Krishnamurthy Subramanian as Chief Economic Advisor and Sanjeev Sanyal as Principal Economic Advisor. The PM Economic Advisory Council has Bibek Debroy, Rathin Roy and Surjit Bhalla among others. And there is, of course, the team at Niti Aayog.

The Economic Survey, which came out one day before the Budget, also talked of the importance of creating a virtuous cycle by kickstarting private sector investment, which would lead to jobs being created as well as help improve exports.

None of these showed up in the Budget speech or the Budget documents. The Budget was incremental in nature, leaving many big corporations feeling disappointed. Our Budget package takes a detailed look at the few good ideas, and the Budget effect on key sectors, including agriculture, jobs, trade, taxes and infrastructure.

Even apart from the Budget announcements, this was a news-packed fortnight. Our other major features look at the efforts to save Dewan Housing Finance (page 88) and the drama at Mindtree (page74).