Why I felt a little short-changed with Budget 2015

There was this sense that I have been short-changed yet again. Not because the Budget rightly shunned populism and focused on growth imperatives, but simply because I expected a grander vision from the BJP and Prime Minister Narendra Modi.

A dramatic transformative moment that leaves us gasping for breath, but equally sets the pace for development and growth in the years to come. There are signs of it in this Budget, camouflaged in the text as Arun Jaitley did not succumb to the perils of petty populism or welfare economics.

He eschewed the need for dole and sops and focused on a higher growth trajectory, alright, but in a half-hearted, intermittent sort of way. He may have been constrained due to little investment elbow room, but if one was expecting a 1991 type of big bang blow out, nothing came or happened.

While my dil may have been asking for more, most people reckon that the economy has been reset by the finance minister through this Budget. Perhaps their level of expectation from a right-wing formation was less and mine was more.

Inflationary

The PM himself may have tweeted - "further reignite our growth engine", but like I said it wasn't 1991, but just another Budget. Jaitley's counter to that was typical, "People who urged us to undertake 'big bang' reforms also say the Indian economy is a super giant, which moves slowly but surely." The elephant analogy again is top of the mind and used so often that it angers me. He added, "My proposals...lay down the roadmap for accelerating growth, enhancing investment, passing on the benefit of growth process to the common man, woman, youth and child.

This is the path we will doggedly and relentlessly pursue." I like the last line because it sums up his state of mind, but I am still suffering from a tinge of indigestion. At the same time, the Budget is inflationary for it stokes the fires across the vector of services. The watchmen have also spoken. Moody's Investors Service said India's 2015-16 Budget unveiled on Saturday was "credit neutral", adding the agency would monitor whether the government can fulfil its pledge to meet its fiscal deficit by boosting economic growth.

Jaitley pushed the deadline to cut the fiscal deficit to 3 per cent of GDP to 2017-18, a year later than previously expected, seeking more elbow room to focus on economic growth. That was a singular positive, for it meant statement of intent on what the government's priorities are.

Worryingly, credit profile on the fiscal side is still an imponderable. The old bogey of growth trumping fiscal rectitude is once again on the front burner. Something that credit rating agencies will view with distaste. New metrics to collate the GDP data has meant that numbers will be higher going forward as a better quality of data is being crunched.

Jaitley has forecast that growth would accelerate to 8-8.5 per cent in the next financial year, up from 7.4 per cent this year.

Reserves

The deteriorating asset quality of public sector banks remains a constraint to India's sovereign credit profile. Even as an injection of Rs 7,940 crore into state-owned banks has been planned in the next fiscal year to bolster their capital reserves, this is a smaller-than-expected sum which means the sector's heavyweights may have to turn to the market or curb lending.

Jaitley outlined the more modest spending plans and said the government would also set up a bureau to improve governance and help state lenders develop capital-raising plans with "innovative financial methods and instruments".

This, he said, was a move towards establishing a holding company for the state's banking investments, a long-awaited step that should end state-directed lending and allow state banks to be run at arm's length. It is true the Centre has taken its time to untie the much-tangled knots left behind by a decade of cronyism, but one would have liked to see a better articulation of some of the reforms.

Boosting public expenditure is a positive, so Rs 1,25,000 crore - including Rs 70,000 crore in capital outlays - adds ballast to the pick-up activity in the real economy. The PM's masterstroke in repositioning and recalibrating cooperative federalism is a gamechanger with far-reaching ramifications. The decision taken on the eve of the budget in sync with the 14th Finance Commission has recommended transferring 42 per cent of gross central tax receipts to states or Rs 1,82,000 crore more in 2015-16 as compared to the previous year.

As Jaitley explained, "The devolution to the states would be of the order of Rs 5.24 lakh crore in 2015-16 as against the devolution of Rs 3.38 lakh crore as per the revised estimates of 2014-15." This stems from Modi's experience as a chief minister where he had to queue up before Planning Commission boss Montek Singh Ahluwalia.

Maybe that is why prime minister Modi hated the idea of the antediluvian Yojana Bhawan and decided to rechristen it Niti Aayog. I was happy to see that strategic sale, an unpalatable part of modern Indian economic lexicon has found its way back into our lingua franca after a decade.

Setting an aggressive target of Rs 69,500 crore, Jaitley is looking to raise as much as Rs 28,500 crore of that from strategic sale in both profit and loss-making companies. This, I believe, is the best reform within the long and tankerous Budget.

Transformative

This is the kind of transformative idea that I was looking for. While Jaitley did not spell out the strategic sale candidates, he has said they could be both profit and loss making entities. Another diversion is the fact that disinvestment proceeds will not be directed to refurbish the bleeding Indian Railways nor be used to recapitalise ailing public sector banks (a practice that the UPA had started), the cash will go back to the Consolidated Fund of India. Which means it can be used to bridge the fiscal deficit.

A moment that could have been defining, a day that could have entered the pantheon of historic announcements has sadly, quietly passed me by, again!