Reforms are part of Budget and beyond

Prakash Chawla ‘Reforms’ are not one-off event but always work in progress, aimed at improving the quality of governance. In the sequence of ‘Reform, Perform, Transform’, the last word – ‘Transform’ is most critical because it clearly sets the objective. Prime Minister Narendra Modi had this task cut out for his government right from his first day in office. The target was and is -Transform while Reform and Perform are the means towards it. The Union Budget is one of the most important means of setting specific milestones and reaching there. Again, Within a set of specific milestones, the ones that relate to the overall public good must be reached fast. Government has a huge annual budget of about Rs 30 lakh crore to spend and must choose the expenditure heads diligently, but the choice spells out its policy direction. In his 2014-15 Budget speech, the then Finance Minister late Arun Jaitley had said so: ” In the first Budget of this NDA government that I am presenting before the august House,my aim is to lay down a broad policy indicator of the direction in which we wish to take this country”. In so much din around us, we would have lost messaging of several key reforms embarked upon by the Modi Government between presentation of its first Budget by Jaitley on July 10, 2014 and the one to be unveiled by Finance Minister Nirmala Sitharaman on February 1,2021. There have been a slew of transformational and life-changing reforms in the last six and half years , but the work is still in progress and must be so. After all, aspirations of 135 crore Indians cannot be met without ‘Reforming, Performing and Transforming’ on a continuous basis. Right from its first Budget when hike in foreign direct investment cap in Defence manufacturing from 26 per cent to 49 per cent along with a similar dispensation in the insurance sector was announced, the NDA Government has been only accelerating the reforms. FDI in Defence sector has now been opened through automatic route up to 74 per cent and even beyond wherever it could result in access to modern technology. While disinvestment road map for the current financial year is not going as per the roadmap, delayed by Covid 19 outbreak, what stands out in the policy dispensation is the decision to go in for outright strategic sale of blue chip PSUs like BPCL, CONCOR and SCI. Such strategic sale could be taken up only during the Atal Bihari Vajpayee government in firms like Maruti Udyog and BALCO among others. Adecision of far-reaching reforms is the approval given by the Modi Cabinet for monetisation of non-core assets. Importantly, the PSU banks which have now been merged into 12 also fall into the non-core areas. In fact, at a time when the fiscal situation is under stress given the commitments required for healthcare , including the Covid vaccine rollout and Rs 29.87 lakh crore Aatmanirbhar Bharat package, there is a strong case for the quick sale of non-core government assets, including real estate in major metros. The Aatmanirbhar Bharat package, announced in three tranches, as per official estimates, equalled 15 per cent of GDP and it combined measures like job support, easy financing of MSMEs, food relief and a helping hand to the stressed sector. The impact has started showing in terms of a sharper economic recovery; but all this had a huge financial commitment and resources for the same must now be raised through innovative and bold measures. Market conditions are perfectly favourable; the bias against PSU stocks in the secondary market is now giving way to optimism on account of their attractive valuations. Time to go for the kill. Setting a disinvestment target of Rs 3 lakh crore and raking up the funds from abundant liquidity should be eminently achievable. Foreign flows are gushing into our financial markets as India figures quite high in the pecking order of the Emerging Markets (EMs). Buoyed by prospects of V-shaped recovery in the FY’22, the Sensex is in the kissing range of the psychologically important 50,000 mark. As the largest recipient among the EMs, India received USD 23 billion in the calendar year of 2020 in equities alone and the gush continues in the new year. Investors, brushing aside the high valuations, remain bullish on the Indian companies on their top line and bottom line prospects. The great India Story is prominently flashing on stock indices. If you happen to be amongst those who consider the equity market speculative, there is another data that explains how global investors want to go long on the India Story. As much as USD 30 billion FDI (foreign direct investment ) was pumped into greenfield and brownfield projects in the first six months of the financial year 2020-21. Even on a most conservative estimate, the FDI inflows for the full FY’21 would easily cross USD 50 billion. Given the geo-political factors at play and the fact the incoming Joe Biden Presidency would not go soft on China, India is being considered as a serious alternative for the global manufacturing giants. As the Prime Minister had recently advised India Inc, we must remain vigilant and become nimble to respond to the fast moving global geo-political scenario. With China, the major manufacturing hub, being in the eye of the storm the job becomes even compelling. After slashing corporate taxes to 22 per cent for existing companies and 15 per cent for new investment, India ranks amongst tax jurisdictions with the lowest rates in the world. It should be projected and promoted as the key pillar of the government’s Make in India programme. Returning to the domestic landscape, introduction of Goods and Services Tax was certainly the most important and life-changing reform of the Modi government. The GST rollout had its share of initial problems, but the stakeholders have got a good hang of it by now. The defining contribution of the GST would be to bring in most of the Indian economy into a formal tax structure with consumers and intermediaries, accepting the dispensation as part of life. Realisation that being tax-compliant makes life easier and even less expensive is more wide-spread now. The government on its part, has cited several examples how GST has made things of everyday use cheaper. For instance, the tax incidence on TV sets, washing machines, water heaters, detergents and cosmetics stands reduced to 18 per cent from 28 per cent in the pre-GST times. The financial inclusion programme, the PM Jandhan Yojana was enabled by the Digital India initiative resulting in reforms which are truly inclusive in nature. Opening 35.27 Jandhan accounts between August,2014 and August, 2019 , of which a large number are linked to UPI (Unified Payment Interface) is something that has transformed the Indian society and consumers at the bottom of the pyramid. Emergence of a large number of Fintech companies with ambitions to go well beyond payment wallets has seeds in the technology-enabled financial inclusion, billed to be largest in the world. As many as 2649 crore financial transactions valued at Rs 161 lakh crore were done on digital platforms. Needless to say, the digital platforms are ready with all the building blocks for a much bigger leap, creating a perfect example of ‘creative disruption’, if you will. Labour reforms, confused with the ‘Hire and Fire’, have been ushered in without much fuss. The codification of 29 different and archaic labour laws into four unified code has largely been welcomed, with states like Madhya Pradesh and Rajasthan showing alacrity in adopting labour reforms, aligning with their own investment policies. The ensuing Budget is going to be vastly different from the past. The Finance Minister, no doubt, is hard pressed for resources, but she would not be under a scanner for crossing the FRBM Lakshman Rekha on fiscal deficit. It may be other way round; too much of financial conservatism on expenditure may not go down well with a vast majority of analysts. Besides, this Budget coming as it does in the middle of a global health emergency, would need to build on the reforms of the past six years. The process of transformation has to be never-ending. (The author is a Delhi-based independent journalist)