It was a budget that came literally days before elections in 5 states. If he wanted to, Modi could have announced just about any freebie: a farm loan waiver, a universal basic income, anything. He didn’t.
He stuck to his guns on fiscal responsibility. It’s an expression of amazing confidence in the maturity of the masses. For right now, even more than ever before, Modi knows that his popularity is sky high. Even Rajdeep, while presenting India Today’s “Mood of the Nation survey” said as much. Modi’s image has become like teflon. Three years into office, his face has become synonymous with the PM’s chair and no leader anywhere in the nation comes even close in stature.
There were the silly Sahara diary charges against him, leveled by Rahul Gandhi. With anyone else, these charges could have stuck or at least started a conversation. But with Modi, the people laughed off the accusations. There is hardly anyone in India today who thinks there is corruption in the Modi government. It’s his biggest asset.
There was the temporary pain caused by demonetization. Amid all the exaggerated criticism that followed his move, the one valid point I heard was about funding of political parties. Well, Modi just lowered the bar on anonymous donations to political parties from Rs 20,000 to Rs 2,000. It’s a fantastic talking point that bolsters Modi’s zero tolerance approach to corruption. BJP should run with it. But don’t expect much from this, for there is hardly anyone who needs convincing any more that Modi stands against corruption. Why else would a Prime Minister risk everything by making the population stand in lines for more than a month? Modi fights corruption. At any cost. At any risk. People see that. This is the leadership they wanted.
So what did I think of the Budget? Well, why are you asking me…did I say I am an economist 🙂 ?
Well, what we do know for sure is that the Sensex thought well of the budget with a massive 500 point leap.
The Sensex had already rallied massively in the weeks leading up to the budget and the further 500 point jump on Wednesday means that investors certainly weren’t disappointed. Even if some journalists probably were. As Rajdeep would have said, the Sensex turned into a Bhakt 🙂
I propose a moment of silence to remember Rajdeep’s historic tweet from last year’s budget.
From closing at 23002 on Feb 29, 2016… the Sensex stands at over 28,100 right now as I type. It’s a gain of over 5000 points in one year. Dear Rajdeep, your tweet will stand as the worst stock market prediction of all time 🙂
And did I mention that it was during the course of last year that 2 disasters struck the Indian economy?
First, we lost the kind guiding hand of Raghuram Rajan, the greatest economist to ever walk the planet. It was predicted that $100 billion of money would be pulled out of the Indian economy. Second, we had demonetization, the fiscal earthquake that sparked metaphors such as “shooting the tires of a racing car”.
Net result of these two disasters: a stock market rise of 5000 points.
But what do I know? I am just a poor fool who knows how to add and subtract.
Jibes apart, the budget did give a big boost to medium and small scale enterprises by cutting taxes AND compliance burdens on them. This is closer to the “government as enabler” right wing economic model of governance, which Modi has been rather shy to embrace ever since he became Prime Minister.
The second thing is the cutting of taxes that boosts the income of the lower middle class. A savings of Rs 12,500 is a lot of money for the overwhelming majority of people in this country. The effective tax rate on the first Rs 5 lakh of income is now a nominal 2.5%. One might have asked for this number to be reduced to ZERO, but I see merit in the Finance Minister’s argument that a nominal tax rate is required for compliance. If the exemption had been raised to 5 lakh, too many people would have stopped filing taxes altogether. A tiny tax rate is needed, not for collecting revenue, but so that incomes are registered in government records. This rate should be reduced further from 2.5% to 1%, perhaps even below 1%…
The most shocking fact that came out in this budget is that there are a mere 78 lakh people paying income tax in this country of 125 crore! This means that every person who pays income tax in this country is supporting, on average, a family of 160 people 🙂 Something to think about…