People usually act as they are. You
don’t see braggadocio from the humble; those with
vertigo don’t traipse at the edge of cliffs; nifty
dressers are rarely unkempt; and careful,
long-standing politicians don’t brandish ideology on
their sleeves.
So, too, Pranab Mukherjee, who presented yet another
Union Budget. He is a careful man; understands
finance; knows what he can and can’t do, and his
party’s expectations; doesn’t seek corporate sector
praise; hates declaiming at the pulpit; and realises
that the budget is but one instrument of economic
policy-making — and not necessarily the most
important. Once you see Mukherjee so, you will
appreciate that the Union Budget for 2010-11 is so
like him.
Mukherjee knew that he had to bring the fiscal
deficit back in line. That meant a gradual roll-back
of some of the earlier stimuli. But in a calibrated
way, without choking off growth. Without taking away
the centrality of major social sector expenditures
and outlays on physical infrastructure. And with
some goodies hidden in the closet.
What does he do? He keeps a tight leash on
expenditure. At Rs.1,108,749 crore, total
expenditure for 2010-11 is only 8.5 per cent above
the revised estimate of 2009-10. Oh, yes. He makes
the right sounds: provides Rs.173,552 crore for
infrastructure; and Rs.137,624 crore on ‘inclusive
development’. Some of these get big hikes in outlay.
But, in real terms, the total budgeted expenditure
of the central government will be only marginally
greater than the revised estimate of 2009-10.
He then gives some and gets some. The ‘gives’ are in
personal income taxes, where he does a tax slab
creep for some categories; grants relief by
marginally increasing deductions; cuts the surcharge
on corporate taxes from 10 per cent to 7.5 per cent;
and increases tax deduction on R&D. The ‘gets’ are
raising the Minimum Alternate Tax from 15 per cent
to 18 per cent on book profits; rolling back excise
duties on most products from 8 per cent to 10 per
cent; hiking the customs duty on crude oil to 5 per
cent; on diesel and petrol to 7.5 per cent; on other
refined petroleum products to 10 per cent; and
raising excise duty on petrol and diesel by Re.1 per
litre.
Mukherjee loses Rs.26,000 crore of revenue on direct
taxes; and gains Rs.43,500 on indirect. Up by
Rs.17,500 crore.
A tight control on expenditure. Some roll back of
stimuli. And two more goodies. The said is Rs.40,000
crore on disinvestment in 2010-11. And unsaid is the
revenue from 3G auctions, which is sure to occur in
2010-11, and at least another Rs.40,000 crore. There
are other upsides. In all likelihood, India’s
nominal GDP at market prices will rise by more than
12.5 per cent, which is the assumption in the
Budget. I expect a growth of at least 14 per cent —
which gives a 1.5 percentage point kicker not only
in the denominator, but also in tax collections. I
won’t be surprised if revenue collections went up by
20 per cent instead of the projected 17.9 per cent.
Add these, and you get a marvellously understated
budget — one with a 95 per cent probability of
overshooting its targets, and may well produce a
fiscal deficit of 5 per cent of GDP in 2010-11,
instead of 5.5 per cent.
That’s Pranab Mukherjee for you. Under-promise, and
hope to over-deliver. Cut the drama. Hold some
serious upside close to the chest. And realise that
reforms don’t begin and end with the last working
day of February.
At 43, I may have been impatient with the lack of
drama. At 53, I am impressed.
Published: Business World, March 2010
