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Breakthrough Budget
There was no dearth of pundits suggesting major reforms on the lines of 1991 in the budget for 2015-16. These pointed to several favourable factors like the majority commanded by the BJP in the Lok Sabha, the steep fall in the price of crude and the comfort on the prices front, to name just a few. Still the railway budget and Central budgets both opted to consolidate the gains and have opted to work for the longer term vision for growth that will be solid and sustainable. Thus there were no big bang reforms or disruptive growth plans that would provide for high decibel media bytes.

The task of Arun Jaitley was by no means easy: just a couple of  days earlier the recommendations of the Fourteenth Finance Commission (FFC) were unveiled. The Y V Reddy led commission suggested an unprecedented ten per cent increase in the devolution of Centre’s tax revenues to the states – from 32 per cent to 42 per cent. Adhering to the party’s election platform of cooperative federalism the government promptly announced the policy to do this with discretion for the states to spend the additional resources as per their priorities. The plethora of Centrally-sponsored schemes over which the Centre exercised discretionary powers was given the go by. Such large transfer in a way reduced the burden on the finance minister though simultaneously it impacted on the Centre’s resources.

Jaitley had to contend with several other problems such as the fall in revenue receipts related to the estimates made, the huge burden of staff salaries and pensions that would ensue with the recommendations of the 7th Pay Commission and the resources starved kitty that impacted investments on a wide range of essential development schemes.


A breakout budget

Viewed in this context, Arun Jaitley deserves  praise for his first full budget. He has stuck to the fiscal deficit targeted by his predecessor of 4.1 per cent of GDP though he has opted to push by one year the target to reach three per cent over the next three years. This decision has provided him the leeway to step up investments and allocations for social and development initiatives. Infrastructure development has been crying for attention. The Manmohan Singh government, more than others, was highlighting the need for a trillion dollar investment under this head. Yet the severe damage caused by the UPA II government in resorting to massive borrowings from the 2009-10 budget, combined with the bloating of subsidies only resulted in a sluggish economy with low growth, little investments, high inflation and endless scams.

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