For years, India has been a dispiriting example of opportunity squandered and potential unfulfilled. Even after economic liberalisation in 1991, India remained hamstrung by a spectacularly inefficient and lacklustre approach to growth. Narendra Modi’s government, swept into office with an impressive mandate in May, promised to change all that with its “big bang reforms”.
Fast forward to Saturday and the first full federal budget presented by Mr Modi’s government. Before he unveiled it, finance minister Arun Jaitley stoked expectations to fever pitch by declaring that it was time for a “quantum leap” on reforms because incremental change “is not going to take us anywhere”. And yet, if anything, the budget seemed to deliver exactly that – incremental change. This was mostly because it failed to explain how it would bring about the economic revolution that India so badly needs.
The budget deftly reconciled some of the interests of the markets with those of the masses. It was good that Mr Jaitley promised roughly 700 billion rupees (Dh41.7bn) in public investment on infrastructure development. But overall, the budget offered precious little detail on all the bold steps the government is proposing to take on a universal social security plan, a goods and services tax and the sale of state assets. After Mr Jaitley’s 95-minute speech then, it’s fair to say, the markets were reasonably satisfied but not particularly excited. And almost no one felt that the government had adequately detailed its road map for the economic transformation that India so badly needs.
One of the biggest disappointments is that despite inheriting an economy that is in reasonably good shape – inflation is under control because of falling crude and commodity prices – Mr Jaitley did not pay much attention to boosting revenues that are desperately needed to reduce the fiscal deficit. Failing to use the low oil price as a chance to trim the gargantuan subsidy bill could prove to be a missed opportunity. The lack of major incentives to bolster Mr Modi’s “Make in India” campaign and the failure to even mention labour market reform mean it’s hardly likely that India will be the world’s workshop any time soon. This was yet another missed opportunity.
