Reforms 2.0

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Jaitley runs the distance to bring a ray of hope for the unknown Indian

Twenty-five years after India’s economic reforms programme got going in 1991, Arun Jaitley, the seventh finance minister in succession, has effected a tectonic shift in the Budget by shifting the discourse, and therefore, the reforms momentum, to rural India, that is Bharat. This is a Herculean effort that not only needed a statement of intent to do good and to service the faceless Indian, but moral conviction of gigantic proportions to shift policymaking from crony capitalism under the previous UPA government run by none other than the father of India’s reforms-turned-Gandhi family henchman Manmohan Singh.

Financial Chronicle not only compliments finance minister Jaitley for his resolve, but salutes prime minister Narendra Modi for his farsighted vision in taking reforms to where they must necessarily belong --- the masses. The Budget squarely puts to rest the accusation made by Gandhi scion and prince-no-longer-so-charming Rahul, that Modi’s is a “suit-boot ki sarkar.”

To celebrate this huge achievement and in tribute to the policymakers who drafted this year’s Budget, our handcrafted Special Edition has been tailormade for our readers to interpret the reforms story with a difference. In doing so, we have drawn inspiration for the second year running from superstar economist Thomas Piketty’s blockbuster Capital in the Twenty-first Century, which makes it to the cover design of today’s edition, alongside all-time great books on world economy. Last year, we saw in Jaitley’s budget the invisible hand of Piketty (and put that in the main headline), a first world economist who has made a strident case for bridging income divides. Interestingly, months after that Budget, Piketty himself travelled to India in January and delivered a lengthy discourse on what India must do for its poor. This Budget, Jaitley’s run the entire course in pushing through that agenda by taking reforms to the masses.

There could hardly have been a better moment than now to take the reforms agenda to the hinterland. The economy seems to have peaked, outshining the rest of our global peers in a climate of worldwide economic volatility in the year gone by. Even if it were to put its best foot forward to push the corporate agenda, the government would have achieved little. GDP growth, which was pegged at 8.5 per cent in last year’s budget, is actually set to rest at 7.6 per cent this year and has been pegged at a conservative 7 per cent to 7.75 per cent for next year, when global headwinds are expected to be fierce. This means, even in the best case scenario, the corporate sector might not be expected to outperform itself in the coming year in the absence of global and domestic consumer demand, even though the seventh pay commission award is expected to put more disposable income in the hands of government employees and a return of good monsoon might push rural consumption. Under the circumstances, wisdom has prevailed upon the mandarins at North Block not to pursue the path of fiscal recklessness, and stay on the journey of course correction that was initiated last year, by pegging the fiscal deficit at 3.5 per cent next year after reining it at 3.9 per cent this year.

That all is not well with the future direction of the economy, where the rich have continued to prosper and the poor have remained marginalised, was brought out with absolute honestly in the Economic Survey for 2015-16 released last Friday. The Survey goes on to warn that unprecedented calamity might visit India in the coming year in the wake of deep-set global economic uncertainty, and that the government might not be able to do anything to lift a debilitated system out of the morass.

Under the circumstances, it has been very smart on the part of Team Modi to reset the reforms agenda by taking it to where it is needed most – the boondocks that successive governments have overlooked in pursuit of the mirage of global greatness. Which is why, we would also like to hark back to the Page 1 masthead of today’s edition that quotes the BJP’s favourite globaliser in the saffron garb, Swami Vivekananda: “Let each one of us pray day and night for the downtrodden millions in India who are held fast by poverty, priestcraft and tyranny -- pray day and night for them. I see what they call the poor of this country, and how many there are who feel for them! Let these people be your god.”

Finally, all that we must say is that of all the measures announced by Jaitley in this Budget, two stand out the most for the honesty of intent. First, is the decision to take cheap cooking gas to millions of poor households. Jaitley plans to distribute subsidised LPG to 1.5 crore households in the next one year, going up to 5 crore in three years. As he put it, “… having an open fire in the kitchen is like burning 400 cigarettes an hour. The time has come to remedy this situation.” At the opposite end, he has raised tax on the super rich, 42,800 of whom have annual incomes above Rs 1 crore. “I also propose to raise the surcharge from 12 per cent to 15 per cent on persons, other than companies, firms and cooperative societies having income above Rs 1 crore,” Jaitley said. He has also imposed cess of 1 per cent on cars costing more than Rs 10 lakh and cash purchase of goods worth Rs 2 lakh and above.

If that’s how Jaitley plans to bridge the income divide, so be it.


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