Arun Jaitley will present his first budget on July 10, which will cover only eight months. Previous budgets in July have enacted significant economic reforms. The budget will likely highlight economic challenges but should also acknowledge India's unprecedented growth over the past decade. It will have the opportunity to provide funding for commitments made in the President's June 9 address to Parliament, continuing popular programs started under previous governments. The budget will face pressures regarding economic policies, and the finance minister's personality may be revealed through the priorities and passions shown in the budget.

1. A
run Jaitley will be
presenting his mai-
den Budget on July
10. Technically, it
will be a budget for eight
months only but such occa-
sions have been used earl-
ier in dramatic fashion. A
similar Budget presented
by none other than Manmo-
han Singh himself in July
1991 effected a revolution-
ary shift in economic policy.
The forthcoming Budget
will predictably start off
highlighting what the fina-
nce minister would call the
“precarious” economic con-
ditions. But this will be par-
tisan politics and would not
be doing full justice to the
transformation that has
undoubtedly taken place in
India over the past decade,
which saw an unprece-
dented 7.7 per cent com-
pound annual growth rate
of real GDP—a hugely im-
pressive achievement by
any standards—and that
too in the face of two severe
global downturns.
It is this growth that re-
sulted in stupendous incre-
ases in public expenditure
in different areas like rural
employment, rural roads,
rural health, urban infrast-
ructure, primary, second-
ary and higher education,
water supply and sanita-
tion. It is also this growth
that, contrary to the impre-
ssion sought to be created
by the Government’s cheer-
leaders, that led to unparal-
leled increases in transfer
of resources from the Cen-
tre to states irrespective of
political ideologies, not as a
favour but simply because
it was the right thing to do.
Clearly, the Budget is an
opportunity to provide for
meaningful financial alloca-
tions for some of the key
commitments contained in
the President’s Address to
Parliament made on
June 9. This the finance
minister will no doubt do.
These pledges are overwh-
elmingly unexceptionable.
They have to be, as they are
a continuation or repac-
kaging or expansion of pro-
grammes already launched
earlier. There is nothing
wrong with this actually.
For instance, UPA did
this with PMGSY (Pradhan
Mantri Gram Sadak Yoj-
ana), which was designed
by Atal Bihari Vajpayee,
and took a Rs 4,000 crore-
a-year programme and
bequeathed a Rs 20,000-
crore programme. Naren-
dra Modi’s Swach Bharat
Mission is nothing but the
Nirmal Bharat Abhiyan.
The commitment to connect
all 250,000-odd gram pan-
chayats through a high-
speed broadband network
was made over two years
ago and is already under-
way. The National Health
Assurance Mission is noth-
ing but an extension of the
National Rural Health Mis-
sion. The frenzy surround-
ing cleaning of the Ganga
must be judged against
Mission Clean Ganga laun-
ched over four years
ago with the objective of en-
suring both nirmal dhara
and aviral dhara.
Before his tragic dem-
ise, minister of rural devel-
opment Gopinath Munde
had gone on record to say
he accorded high priority to
the implementation of the
new land acquisition law, a
historic piece of legislation
passed by Parliament enth-
usiastically and unanimou-
sly in September 2013.
With his departure, it
remains to be seen how the
finance minister will deal
with the pressures from
both within and outside
Government to ‘loosen’ the
provisions of the new law
and demonstrate so-called
‘pragmatism’, even if it
means abandoning his
party’s own ‘progressive’
stance of 10 months ago
that enabled UPA to get the
law through Parliament.
Similarly, there have
been calls for linking MGN-
REGA to creation of assets
forgetting that in 2013-14,
around 28 per cent of the
works taken up under it
was toilet construction,
37 per cent relate to water
conservation structures and
12 per cent to works rela-
ted to productivity improve-
ments on private lands
owned by small and margi-
nal farmers. The schedule
of permissible works alre-
ady includes a large num-
ber of assets like grain
storage depots, anganwadi
centres, roads, etc. Hope-
fully, in his newcomer’s en-
thusiasm, the finance
minister will not forget that
MGNREGA has three equa-
lly important objectives:
(i) provision of wage em-
ployment to households
in distress; (ii) creation
of durable and productive
assets; and (iii) empower-
ment of gram panchayats.
He must not fall prey to
lobbies who, in the garb of
‘asset creation’, want
to make MGNREGA a
rent-seeking contractor-
driven programme,
which would destroy
its very ethos.
Before the interim bud-
get was presented in Feb-
ruary this year, Montek
Singh Ahluwalia, the then-
deputy chairman of the
Planning Commission, had
called for a fresh look at
fiscal parameters. This is
something to which the
new finance minister must
pay close and serious
attention and perhaps kick-
start an informed debate.
Ahluwalia had rightly
argued that we must (i)
focus on ‘primary deficit’,
that is the fiscal deficit min-
us interest payments which
are technically not ‘expen-
ditures’ in the national ac-
counting sense; (ii) use the
concept of “structurally ad-
justed deficit” to take into
account variations in GDP
growth so that fiscal policy
is pro-cyclical rather than
counter-cyclical; and (iii)
abandon the concept of rev-
enue deficit since, for insta-
nce, grant transfers to
states to finance their capi-
tal expenditure is treated as
revenue expenditure of the
Centre. Budget support to
the Railways or Govern-
ment’s contribution to the
capitalisation of public sec-
tor banks should not be in-
cluded in calculations of the
fiscal deficit. The Fiscal
Responsibility and Budget
Management Act, 2003,
clearly needs to be revisited
in light of the experience
we have had, the limita-
tions inherent in some of
the key parameters used
as goalposts and interna-
tional practice as well
which, for example, does
not treat disinvestment
proceeds as “revenue”.
The Budget will
undoubtedly speak of
the Goods and Services Tax
(GST)—a truly far-reaching
fiscal reform first proposed
in July 2004 by the Vijay
Kelkar committee set up by
Jaswant Singh when he
was finance minister. The
idea was taken forward
substantially in the best
traditions of democracy by
his successors P. Chidam-
baram and Pranab Mukh-
erjee. GST also found a
strong champion in Sushil
Kumar Modi when he was
Bihar’s finance minister,
but nothing could materi-
alise these past five years
because of the determined
opposition from the chief
ministers of Gujarat and
Madhya Pradesh. The PM
seems to have overcome
the objections of the imme-
diate former chief minister
of Gujarat and it is really
high time that we amend
the Constitution and make
GST a reality. The intro-
duction of GST will not
only create a single, uni-
fied market, it will have a
major positive impact on
the ease of doing business
and enhance the competi-
tiveness of Indian manu-
facturing.
Hopefully, the finance
minister will boldly take
forward Aadhaar, the bio-
metric-based unique iden-
tity number along with the
Aadhaar Enabled Payment
System (AEPS) of which
many BJP chief ministers
have been keen advocates.
Jayant Sinha, the current
BJP Hazaribagh MP, also
supports it strongly while
his father, the former MP
Yashwant Sinha, cussedly
killed it in the Standing
Committee on Finance that
he chaired in the 15th Lok
Sabha. More than 600 mil-
lion Indian residents have
already got Aadhaar, which
can be the most powerful
instrument for eliminating
corruption, fraud and rent-
seeking at the grassroots
which no Lokpal will ever
be able to do.
Ideological inclinations
for a ‘national identity card’
apart, it would be foolhardy
to turn one’s back on such
an important innovation in
service delivery which will
ensure pensions, subsidies,
PDS rations, wages and
other financial benefits
reach the right people and
on time through a seamless
interoperable payment sys-
tem anchored in a competi-
tive network of business
correspondents (BCs) like
women self-help groups.
Estimates from pilots show
the use of Aadhaar can save
at least 20 per cent of gov-
ernment spending on trans-
fers (estimated at something
like a whopping Rs 350,000
crore per year), create more
than one million jobs as
BCs, besides becoming a
powerful instrument for
financial inclusion.
Finally, every Budget
reveals some hidden side of
a finance minister’s person-
ality. It is only through their
Budgets, for instance, that
the world came to know
about Manmohan
Singh’s deep knowledge
of Muhammad Iqbal and
P. Chidambaram’s of
Thiruvalluvar. Apart from
the budgetary pyrotechnics,
the nation awaits Jaitley’s
hidden passions to surface
as well. ■
34 INDIA TODAY ◆ JULY 7, 2014 JULY 7, 2014 ◆ INDIA TODAY 35
BUDGET2014COVERSTORY
JAIRAM
RAMESH
Between 2006 and 2014,
Jairam Ramesh was a minister
in the Ministries of Commerce,
Power, Environment and
Forests, Drinking Water
and Sanitation and
Rural Development
IllustrationbySAURABHSINGH
THE BUDGETISAN
OPPORTUNITYTO
PROVIDE FOR MEAN-
INGFULFINANCIAL
ALLOCATIONS FOR
SOME OFTHE KEY
COMMITMENTS
CONTAINED IN
THE PRESIDENT’S
JUNE 9ADDRESS
TO PARLIAMENT.
The finance minister must persist with effective schemes of the UPA