The Budget has set the stage for Modi in the run-up to 2024

AFTER SIX YEARS OF WATCHING THE PRESENTATION OF THE UNION Budget from the visitor’s gallery in Parliament, I experienced Nirmala Sitharaman’s fifth consecutive Budget from the comforts of home. It was a prudent decision. While there are certain undeniable charms of watching the Budget live in the company of Members of Parliament (MPs) and then imbibing their instant reactions in the Central Hall of Parliament, there are grave limitations too. The parliamentary experience is wonderfully self-contained. However, observing the Budget unfold on a TV screen connects the viewer with the instant (and sometimes knee-jerk) reactions of a slice of the outside, at least that section that has a stake in the stock markets.

This year, there was an additional bonus. During the finance minister’s very crisp and business-like presentation of the Budget—shorn, mercifully, of both hyperbole and the obligatory, concluding quote from a favourite sage—I received at least four calls that I felt obliged to answer. Three were from political associates and were more than courtesy calls and the final one was from the relationship manager of a credit card company I happen to patronise. What appeared significant is not that the calls were made, but that they were made midway through the Budget speech. I informed all the callers that the finance minister had grabbed my mindspace and that I would return the call later in the day. Yet, what struck me was that none of these callers imagined that the timing of their call was inopportune.

For a few years, or at least since the enactment of the Goods and Services Tax (GST), I have emphasised the growing loss of importance of the Union Budget. At one time, particularly in the bad old days of Congress socialism, the Budget was an occasion for insomnia and blood pressure fluctuation. From the businessman who prayed for either tax relief or at least the status quo to prevail, to the individual taxpayer that hoped his modest extra earning would accrue to his own pocket rather than flow into the bottomless pit of the Treasury, the Budget was a point of tension, not least because it was unpredictable. Thanks to the Centre and the states pooling their sovereignty in the GST Council which alone can alter the rates of indirect taxation (except for petrol and alcohol where prices can vary on the strength of state-imposed levies), much of the unpredictability that clouded the business environment in India has disappeared. And with the old squeeze-the-rich socialist mantra having been replaced by an adherence to the Laffer Curve, benign rates of taxation have become the new normal in India. Consequently, the significance of the Union Budget has become an occasion where the Centre can sanction its expenditure blueprint and lay down a macroeconomic route map.

For Nirmala Sitharaman, this Budget had an exceptional significance: it is the last complete Budget before the 2024 General Election. Although perceptions are built on the strength of longer-term impressions, the 2023 Budget has come to be regarded as the first draft of the Bharatiya Janata Party’s (BJP) manifesto for re-election. This was a Budget that allows the finance minister scope for some decorative embellishments, but there should be little doubt that this was a document that has the signature of Prime Minister Narendra Modi on every detail.

The full political backing of the Budget from the prime minister and his office needs to be emphasised. Unlike many prime ministers who were concerned only with the big picture and left the detailing to be done by the Ministry of Finance in North Block, Modi, particularly since he began his second term in 2019, has left nothing to chance. This hands-on approach is not an expression of no-confidence in the finance minister (who, judged by the stature of her predecessor, has never been all that politically consequential) but stems from a determination to ensure there is complete synergy between different wings of the government, and a broad adherence to the political impulses of BJP. The Atal Bihari Vajpayee government had suffered from this lack of coordination with a Prime Minister’s Office (PMO) that often had its own ideas and a finance minister who never quite gauged the political instincts of the party he nominally represented. Compounding the problem was Vajpayee whose interest in finance and the economy was, at best, perfunctory.

The Budget of 2023 is emphatically political, despite the careful eschewal of rhetorical flourishes by Sitharaman.

First, at the macro level, the Budget has not deviated from the yardstick of fiscal responsibility that both investors and the international community attach great importance to. This should have been clear during the management of the Covid-19 pandemic two years ago. At that time, the conventional wisdom in the community of economists was that it was imperative to loosen the purse strings generously and ensure cash in the pockets of beleaguered citizens. Their intentions were noble, but the consequences of this generosity have been catastrophic. Europe has been reeling from a combination of high inflation, high energy prices and the supply-chain disruptions triggered by the conflict in Ukraine. Despite fierce criticism from the opposition and professional economists who are often inclined to view India as a mere case study, Modi resisted this temptation and instead focused government attention on free rations that prevented absolute destitution, targeted handouts to the most vulnerable sections, and a single-minded focus on the production and efficient distribution of the anti-Covid vaccines.

The approach worked. In political terms, the measure of success was apparent in the results of last year’s elections to the Uttar Pradesh Assembly where the free food rations appear to have played a role in bolstering BJP support. In terms of the management of the economy, the mass vaccination programme—arguably one of the most efficient exercises globally—resulted in the resumption of economic activity much quicker than earlier anticipated. So much so, that the Economic Survey can confidently speak of “complete recovery”—a prognosis that may be underestimating global headwinds.

Most important, this measured and targeted response to the pandemic and its aftermath led to India managing to keep the fiscal deficit to a very manageable 6.7 per cent, lower than the 6.9 per cent estimated earlier. This demonstration of fiscal responsibility is certain to keep the Indian flag flying high in the global community.

Second, unlike earlier Congress governments where political outreach was measured by the distribution of freebies and job creation was assigned to the public sector, the Modi government’s focus has been on capacity-building in infrastructure. As in the past nine years, this year’s Budget has continued the practice of pouring in resources to bolster infrastructure. Although this approach has its political critics who believe that distribution of monetary freebies is more rewarding—witness the political rewards that accrued to Mamata Banerjee from the Laxmir Bhandar scheme in West Bengal that doles out ₹500 per month to all women who have registered for it—Modi has stuck to the principle that asset creation has a more sustainable multiplier effect.

In this year’s pre-election Budget, Nirmala Sitharaman has enhanced the proposed government spending on infrastructure—particularly on upgrading roads, railways, airports and developing other forms of connectivity—from the ₹7.5 lakh crore in last year’s Budget to ₹10 lakh crore. This is a whopping 33 per cent jump and amounts to 3.3 per cent of GDP. The proposed capital expenditure on Indian Railways is ₹2.4 lakh crore. Properly utilised, this will change the face of the railway service and have a direct impact on the lives of most Indians. The demand for the short-distance Vande Bharat trains has been mounting from different parts of the country.

Third, just as the supply of free cooking gas to the disadvantaged and the construction of household toilets in rural areas was a very big factor in Modi’s emphatic victory in 2019, this role is likely to be assumed by the Pradhan Mantri Awas Yojana (PMAY). The scheme sets out an ambitious objective of “housing for all” but is focused on creating a large housing pool for the poorest of the poor in rural areas and small towns. The outlay on PMAY has been increased by a whopping 66 per cent to ₹79,000 crore—an indication of the importance the government attaches to this scheme in gathering incremental votes. Since the implementation of the scheme—particularly the identification of beneficiaries is in the hands of panchayats and state governments—PMAY is likely to become a battleground in states where BJP is not in power.

Fourth, in this Budget, the Modi government is back to the business of pandering to BJP’s earliest core vote—the middle-class voters in urban centres. Of course, in the political context, the expression “middle class” signifies much more than graduates and nominal white-collar employees in the public and private sectors. It denotes almost every family that aspires to a middle-class existence and whose aspirations are unquestioningly middle-class. The Budget has targeted this important segment of aspirational India with a new tax code that gives the lower rungs of the middle classes more disposable income.

The monthly savings of a few hundred rupees for those at the bottom end of both the organised and informal sectors may not seem all that significant to those glued to the assumptions of cosmopolitan India. However, read with the other measures, from enlarging the scope of digi-lockers to making domestic travel more affordable, the Modi government is sending out unmistakable signals that reinforce its commitment to yuva shakti. BJP is appealing to the aspirations of young India whereas the likes of Rahul Gandhi and Left forces are out to tap the reservoirs of anger and frustration in youth.

FINALLY, THIS BUDGET IS A CLEAR DEMONSTRATION that India will fully utilise its presidency of the G20 to enhance its global profile. The ₹990 crore—a not insignificant sum—set aside for expenses on events centred on India’s G20 presidency is important. However, equally important is the global fallout of the huge expenditure by different ministries and standalone schemes to convey an image of a rising, modern India committed to enlightened values. The focus on green projects in the Budget, whether the funds for research on the batteries for electronic vehicles and the ₹35,000 crore capital investment plan to facilitate the shift to clean energy, will enhance India’s global reputation as a responsible nation mindful of its obligations to the planet. In terms of a larger foreign-policy vision, these domestic measures are important and help offset the flood of negative publicity that comes the way of both India and Modi for allegedly promoting majoritarianism. India’s commitment to making the environment cleaner won’t necessarily shift the positions of those driven by left-liberal principles and the angst of India’s erstwhile ancien regime. However, without these investments—with prospects of decent commercial returns—the assault on India globally would have been shriller. The now-controversial Gautam Adani is still paying the price of getting on the wrong side of the green movement in Australia.

The next 400 days or so are going to be riddled with overdoses of political excitement. The narrative for the re-election campaign is being written and re-written by BJP strategists at all levels. In this game, there will be sustained focus on Prime Minister Modi. Much more than the election campaigns of 2014 and 2019, the election of 2024 is going to be totally presidential in nature. Naturally, the larger-than-life public image of the prime minister rests on his different achievements, not to mention his powerful, politician-cum-saint projection. But after 10 years in power, there is a very important role to be played by the report card of achievements, disappointments, and even failures. There is also a larger measure of importance in shaping the narrative around more recent events, including the Budget that was received enthusiastically by both MPs and party workers. This is where Nirmala Sitharaman’s fifth Budget is relevant. She has set the stage for the entry of the Superstar in the slog overs.

Covid-19General election 2024Narendra ModiNirmala SitharamanOpenomics 2023Pradhan Mantri Awas YojanaUnion Budget 2023