Budget 2016: The End Of Ideology

The Arun Jaitley Budget, which also marks the 25th anniversary of the landmark Manmohan Singh Budget of 1991, envisions an India sustained by annlightened state and a less skewed market.

- Swapan Dasgupta

There were a lot of things that Finance Minister Arun Jaitley got right in his 2016 Union Budget. The greatest achievement lay undoubtedly in the Finance Ministry’s adherence to a fiscal deficit target that, apart from boosting India’s credibility in the troubled world of global capitalism, has put intense pressure on Reserve Bank of India Governor Raghuram Rajan to bring down interest rates further and thus make the cost of money more competitive.

To my mind, the 2016 Budget suffered from two significant shortcomings. The first, which has already kicked up a political storm and may even lead to a rollback, was the tax imposed on lump sum withdrawals from the Employees’ Provident Fund scheme. The proposal to synchronise the different post-retirement schemes may well have precedents in the West. However, the belief that a privilege once given to the workforce of the organised sector can be peremptorily withdrawn indicated an astonishing measure of political naiveté. In the past, Jaitley has been accused of being too trusting of his bureaucrats, many of whom were positively hostile to the Narendra Modi Government, and not even kindly disposed towards the Finance Minister personally. In endorsing the EPF changes in the name of ‘reform’, he was guilty of accepting the wisdom of economists without political filtration. A Budget that had otherwise secured the approval of the political class, investors and even voters, was quite needlessly dragged into controversy for no apparent gain to the state exchequer. The lesson of this EPF storm is obvious: the economy is too serious a business to be left to the economists.