Evaluating the budget

Normally, I look for the following, given my macro orientation

(a) Assumption on nominal GDP growth. Is it realistic and even conservative?

(b) Assumptions on growth in various revenue items – corporate tax, personal income tax, excise and customs

(c) Assumption on Public Sector Asset Sale Amount

(d) Assumption on dividends from PSU

(e) Growth in Overall Expenditure and growth in Overall Revenue – how far they are in or out of line with last decadal trends

(f) Then, expenditure on specific subsidy items – food, fertiliser and oil. Of course, these could be losing their importance. It is a good thing.

(g) The outcomes statement on last year’s budget promises. (In this budget, I would be looking for some update on MUDRA performance vs. expectation).

(h) Primary and Revenue Balance achievement and the projections for both

In this specific budget, I would be looking for

(a) The delivery on the promise of removing ad-hoc exemptions and lowering corporate taxes.

(b) The roadmap for implementation of Parthasarathy Shome and (if possible) Justice Easwar committee recommendations on tax law simplification or actual steps, where feasible.

(c) Long-term farm sector answers – irrigation, productivity and risk management solutions rather than one-off giveaways. Export liberalisation for agri. products would be welcome too.

(d) Long-term reforms – capital gains exemption time-frame extended to 3 years.

(e) Securities Transaction Tax to be hiked

(f) Any other reform to re-invigorate retail participation in stock markets (have no specific idea in mind)

(g) Any fine-tuning to the gold monetisation scheme

(h) An update on the Fiscal Federalism of the last year and continuation.

(i) Bank recapitalisation measures coupled with governance reforms. The latter is strictly not part of the budget but an imaginative, meaningful, purposeful, measurable (i.e., monitorable) package would be very welcome.

(j) Any initiative to shore up India’s economic data quality, reliability and timeliness

What I would not like to see

(a) Too many new schemes

(b) Too many new revenue-spending initiatives

(c) One-off populist schemes for farmers (certainly not a loan waiver)

(d) Any tax amnesty scheme

(e) Fiscal slippage without rigorous explanation and monitoring. Ideally tied only to bank recap.

(f) Mindless incentives for financial products (derivatives, futures, options) trading

Bonuses I would be pleased about

(i) A more purposefully written Medium-Term Fiscal Policy Statement, Macro-economic framework statement and Fiscal Policy Strategy Statement. Right now, there is considerable overlap in all three and the government’s commitment to them is perfunctory. If the Government makes them purposeful, streamlined and take them seriously, that would signal a different government with a different approach to governance.

(ii) Transparency in the budgeting process

(iii) A better and internationally accepted framework for Budget Accounting.

(iv) Any other that I don’t see now but can recognise when I see it 🙂


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