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Budget without Heft
Budget 2016-17 correctly recognises that the economy is facing a demand slowdown but fails to back this up with necessary expenditure to boost aggregate demand. Guided by its programme of fiscal consolidation, the government has almost frozen public investment in order to achieve the targeted deficit for 2016-17. While its proclamation to improve ordinary lives is welcome, a rearrangement of deep-rooted structures of public expenditure in India is required to achieve this.
Two years into its term, the Narendra Modi government has presented an interesting budget. That a budget is interesting need not, of course, imply craft. This one is interesting in large part because it was unexpected. What had been expected was more of the by now familiar solicitousness towards the corporate sector of this government. Instead, we have a budget that comes across as focused on the rural sector and claiming to “transform the lives of the people.” Whether this directional change has been brought about because of politics, with an eye on state assembly elections, or out of panic over the state of the economy, which has not shown anything of the vigour that Modi had promised during his election campaign, is of interest of course; but an analysis of the budget need not remain hostage to this question.
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