It has begun to dawn on people that the Union Budget is not a miracle maker and the headroom the finance minister has to make big-bang outlays are limited. Yet we went into this round with expectations soaring sky high. The continuing slowdown, and lack of demand and consumption that is dragging the economy, generated hopes that the government would work wonders for new investment and jobs. These hopes have been generally belied, and the stock market expressed disappointment, pushing down the Sensex nearly a 1,000 points at close.

On the other hand, there were specific expectations, like that the tax regime would be eased to give individuals and corporations more money to stoke demand. This fortunately has materialised, though expectations on sops for the housing sector went crashing. The farm sector and infrastructure found large space in Finance Minister Nirmala Sitharaman’s speech.

Rightly so, as these are strong drivers of the economy. The FM outlined a 16-point action programme that included turning around 100 water-scarcity-hit districts, encouraging traditional fertilisers and providing cold chain warehousing with refrigerated rail coaches and airline capacity. The rural agenda has an outlay of `2.83 lakh crore, and the FM expects farm incomes will double by 2022.

However, the fact is this is less than `2.9 lakh crore, the outlay of the previous year, and is unlikely to give the sector the robust push in projects and income it sorely needs. With two years to go for 2022, doubling farm income is not an achievable target. Infrastructure too had a big ticket announcement of `103 lakh crore in projects being promised over five years. In actual allocation though, the transport sector got `1.7 lakh crore, which is about the same provided last year. 

A closer look at the Budget speech, the longest ever, reveals there is very little in growth stimuli, something everyone was hoping would crank up the economy. On the tax front, there has been an earnest attempt to clean up the mess and make the regime less onerous for the middle class. It was expected that the tax slabs for personal income tax would be revised with some relief for the mass of taxpayers at the bottom of the pyramid. And Sitharaman obliged.

For those earning up to `15 lakh annually, there will be four additional slabs and the tax rate will go down by 10% to 25%. For a lot of people it will halve the tax they paid earlier. This is an effort to put more money in the pockets of a class of people that use their disposable income for consumption. With this measure, the government is hoping increased demand will fire up manufacturing and services, and generate jobs. 

The income tax concessions come with riders and presume those who are benefitting have not opted for exemptions. While all the caveats are not clear yet, the benefits will have the government foregoing `40,000 crore in direct tax revenue. A welcome bid for simplification of the tax regime is also being made by reducing the 100 or more exemptions to just 30 in the Income Tax Act. To clean up the system a Tax Payers’ Charter is being put out presumably to highlight the rights of the taxed; a dispute redressal scheme too is also in the pipeline that will dispense with the interest and penalties slapped on recalcitrant taxpayers if they agree to settle the original demand. The latter will be a big boon considering the penalties and interest are often 3-4 times the size of the original claim!

One could see a genuine bid to mend fences with the corporate sector and to address increasing fears of aggressive regulation. “Wealth creators will be respected,” Sitharaman repeated a couple of times, while promising to bring in amendments to ‘decriminalise’ charges that are of civil nature. She also threw in a long-awaited sweetener by withdrawing the 15% dividend distribution tax (DDT) on dividends companies pay to their investors. This has been a major grouse of foreign companies since DDT lowers their returns and therefore becomes a disincentive for fresh investments. 

There were expectations that the dithering housing sector would get a leg up. Except for minor concessions like extending the tax holiday by a year for affordable housing projects, there was nothing. The Budget is full of imponderables too. The slowdown has reduced revenue receipts, which has increased the deficit from the original 3.3% of GDP to 3.8% for the current year and a slightly lower 3.5% for the next FY2021. These figures assume a major mobilisation of foreign investment and a whoppingly big IPO that the FM announced for the Life Insurance Corporation. These estimations may or may not happen. Significantly, demonetisation found no mention, for once, while the silence on jobs and job creation was deafeningly loud. Overall, the Budget sounded as tired as the FM by the time she got to the end of her speech.