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Business as Usual
The global situation is tense, marked with protectionism. The domestic environment is constrained by the twin balance sheet crisis. The dull investment climate was further jeopardised by the note ban. The budget has failed to create a policy environment to kick-start a virtuous investment cycle. It has failed to address critical issue of accelerating employment.
The presentation of the Union Budget in India, unlike in most other countries, is a big event. The reason for this has to be found in the legacy of a planned development strategy in which the budget was not merely a financial statement required to be placed in Parliament under Article 112 of the Constitution, but became a mechanism to transmit policy directions to the economy. The legacy has continued even as the planning process itself has got diluted. From that perspective, excessive focus on the budget is somewhat misplaced as policy pronouncements and decisions are taken not just through the budget announcement, but throughout the year.
Even from purely a fiscal policy stance, the Union Budget in India accounts for only a little more than a half of the deficits, 68% of outstanding debt, 60% of taxes collected, and 58% of actual spending are undertaken at the state level. Nevertheless, the Union Budget provides important signals on the extent of government interventions in the market, and has macro- and micro-economic implications from its stance on deficits and debt, tax and expenditure proposals, and intergovernmental finance.
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