BUDGET 2022-23: CROSSING THE RUBICON

Riding on newly laid digital rails, enterprise inspired by start-ups and political will, this Budget has launched an irrevocable makeover of India. EPISODE #59

Dear Reader,

A very Happy Monday to you.

Last week Finance Minister Nirmala Sitharaman presented her fourth Union Budget and the Bharatiya Janata Party (BJP)-led National Democratic Alliance its 10th. Contrary to expectations, given the upcoming round of state elections, this Budget was sans any fresh freebies and sops.

In the pantheon of Budgets this is unique. Unlike most efforts, this year’s Budget lacked any big flourishes and was pretty rounded—having positioned itself as an extension of last year’s ‘Once in 100 years Budget’. Without the usual angularities—typically concerning a rejig of tax rates—critics and supporters alike were left a little underwhelmed.

Yet in terms of import, it is meant to be the exact opposite. Why? This is why I chose the headline: Crossing the Rubicon. It is drawn from Julius Caesar’s actions which irrevocably altered the future of the Roman Empire. Indeed this Budget commits itself to a similar makeover of India. Read on and do share your feedback.

I snagged a bonus this week: co-hosting the first post-Budget interview with FM Sitharaman. It was a good experience, especially for the opportunity to work with Ajay Mishra, the ever sharp and composed correspondent from Doordarshan, the backend team from both Doordarshan and Sansad TV and the facilitators, Press Information Bureau. It was nice to be back in the thick of an exciting newsroom on Budget day. 😊

This week’s cover picture is I believe a sculpture by Valerie Hadida. Saw this compelling piece of art displayed in a hotel and was drawn to it instantly. Hope it appeals to you too.

In last week’s column I committed an error in converting crores into billion rupees. Thank you Vivek for flagging it. Grateful. I am sorry.

A big shoutout to Gautam, Vandana and Vivek for your informed responses, appreciation and amplification for last week’s column. Gratitude also to all those who responded on Twitter and Linkedin. Reader participation and amplification is key to growing this newsletter community. And, many thanks to readers who hit the like button😊.

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INDIA @100

Last week Finance Minister Nirmala Sitharaman presented her fourth Union Budget and the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) its 10th consecutive one. Contrary to expectations, given the imminent round of state elections where the BJP has serious skin in the game, the Budget was sans freebies and sops.

In the pantheon of Budgets this is unique. Abandoning par for the course in Budget making meant that FM Sitharaman’s effort lacked any big flourishes and was pretty rounded—having positioned itself as an extension of last year’s ‘Once in 100 years Budget’. Without the usual angularities—typically concerning a rejig of tax rates—critics and supporters alike were left a little underwhelmed.

Yet in terms of import, the impact of this year’s Budget is meant to be exactly the opposite. It is poised to set in motion a another round of change that will lend fresh momentum to the several policy shifts initiated over the last seven years of the NDA tenure.

Ideologically it is transiting India from an entitlement to an empowerment regime. One in which the cynical business of poverty—wherein no one really walks the talk of alleviating poverty even while huge sums of money are diverted to the cause—will be replaced by an ecosystem that will provide the basis for empowerment. In short teaching people how to fish and not simply hand it to them.

Haseeb Drabu and I have explained this makeover at length in the cover story we wrote for The Open magazine. Instead of doing a recap I would suggest you read the piece.

It is long but please stay the course so that you absorb the essence of what we argued. We went the extra mile to cut out the jargon and decode the Budget for all. Please click this link.

Instead what I will try and do is to flesh out the arguments. Since the presentation of the Budget and after the scramble to catch the deadline for Open I have had more time to dwell on our arguments. It only reinforced my initial thoughts about the Union Budget for 2021-22.

Exactly why I opted for the headline: Crossing the Rubicon. It is drawn from Julius Caesar’s rebellious actions which irrevocably altered the future of the Roman Empire. Indeed this Budget commits itself to a similar makeover of India.

In fact the finance minister made this clear in her speech on 1 February.

“This Budget seeks to lay the foundation and give a blueprint to steer the economy over the Amrit Kaal of the next 25 years—from India at 75 to India at 100.”

This is a claim that can only be judged after 25 years. True. Yet, we can make an ex ante assessment of the NDA’s intent to transition the country from an “Accidental India” to one that is an “India by design and purpose”.

Firstly, there seems to be an interesting turn of circumstances. Unlike in the past there seems to be a fortuitous convergence of key trends. At one level the fierce confrontation between the West and China together with the latter descending into some kind of internal chaos as the leadership seeks to pivot the country is creating space at the global high table.

Simultaneously India with its huge market potential, islands of excellence and steady, baby steps towards a rules-based regime is finally beginning to appeal to even the conservative global investors. Domestically, the banking sector is emerging from a massive clean-up of its severely damaged balance sheet, even while India Inc has deleveraged itself—whereby while one is in a position to lend the other is able to borrow.

Secondly, after its soft launch in 2009, Aadhaar laid the foundation for a new set of digital rails for India. The trials and tribulations it underwent has only solved for some of its kinks. Today this unique 12-digit identity issued to all residents of India is being leveraged to power a digital revolution—something the world is sitting up and taking notice.

As a regular reader of this column you would recall that I have frequently alluded to and written about this profound transformation. Sharing the most recent one about the soon to be launched democratisation of the business of e-commerce, which among other things will challenge the hegemony of the big platforms to benefit even small consumers and sellers.

You can click the link below if you wish to read it.

A UPI MOMENT FOR E-COMMERCE

Thirdly, the NDA has legitimised honest business.

Yes, while the initial years was about tough love with a severe crackdown on alleged wrongdoing, the last few years has accorded business the status of a legit stakeholder in the Indian economy.

To balance the seemingly two competing interests—social welfare and promoting business—the NDA coined the term ‘pro-poor and pro-business’. If that was not enough the NDA has not shied away from feting business—in contrast to the past where these interactions were either off the book or sotto voce. The turning point was last year’s Budget when the NDA formally buried a Nehruvian legacy; it abandoned the idea of the public sector as the commanding heights of the Indian economy and embraced privatisation—a point driven home with the sale of Air India to the Tata group.

The FM made this clear in her post-budget interview granted to The Open:

“The approach to jobs is to facilitate people to have their own business. Ensure an ecosystem to allow people to be entrepreneurial and also create more jobs. This is not to say that government jobs are not going to be available. The approach during Budget-making is that we need to have a blend of both the government and the private sectors.”

Finally, over the last decade India has gradually improved the plumbing in the economy as it were. It has weaponised Aadhaar to develop digital rails to deliver public services like the Direct Benefits Transfer (at the end of March 2020, the period after which the data has not been updated by the union government, the savings to the exchequer was Rs1.7 trillion).

This in turn has created the stakeholder economy. Instead of being perennially left out—with the promise of being included delivered in every election cycle—there are scores of new beneficiaries of social welfare and those accessing basic material needs like electricity, drinking water and healthcare.

In short, instead of outside looking in, the are more people than ever before who are now inside looking out. The view as a stakeholder in the economy, as we all know, is radically different.

Listing a few:

• Rs 500 per month for three months benefited 20.64 crore women;

• Rs 6,000 annual payment under PM Kisan covered 10 crore farm households;

• Free food grains for the last 18 months benefitted 80 crore people;

• Three free gas cylinders provided to 8 crore households;

• Access to drinking water by tap: 5.5 crore new beneficiaries added since 2019;

This has also eliminated both corruption and the inevitable middleman with their commissions. A collateral gain is that gradually the union government is restoring the trust quotient between the public and the state.

This is very important in a post-covid era where the role of state has become critical in rebuilding the economy. Interestingly this is true for not only India but every other economy in the world. Without the trust of the public it will be impossible to rebuild an economy and heal the trauma that this once in a century pandemic has caused.

If we connect these dots what emerges is that indeed the NDA has a fair shot at achieving the makeover it intends for India. We can quibble whether it is good or bad. But you can’t deny that change is imminent.

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Recommended Viewing

As mentioned in the introduction I was roped-in to co-host FM Sitharaman’s first post-budget interview. It was granted to Doordarshan.

In case you missed the live telecast please click the YouTube link below. Even if you did catch it live I would recommend watching it again—the nuances always offer fresh insights when revisited.

It is a 40-minute long conversation in which the FM dwelled in detail on a range of issues including about the underlying thought of the Union Budget, clarifications on the crypto tax and the paradigm of incentives that come with the new economic playbook that the NDA is crafting for India.

Sharing a sample of what she said in response to the query that the Budget had seemingly ignored the middle class:

“I fully recognise that every section of society has suffered, the middle class has definitely suffered. But when we talk about the middle class, I understand, you understand, all of us understand, and each of us also perceive, that there is an element of middle class in us also and therefore we understand the element of suffering.

Yet, we also belong to some other group. For instance, if you or your brother or your son start a startup, and he gets benefits, isn’t that middle class? If his children are going abroad and if I give them all the facilities to transfer money, for their education abroad and also give them a passport which is going to be futuristic and ensure that when they come back they can have a skilling programme, and I also make sure that high-class universities are set up in India, is that not addressing the middle class? And similarly, don’t we think that farmers are middle class? Will they not get benefits? Will we think that a person running an MSME is not middle class?”

Till we meet again next week. Stay safe.