This is a political budget. The government has at last discovered the virtues of attending to the needs of the agriculture sector and the rural poor, but this has more to do with upcoming state elections than with a coherent economic vision. Between sending reassuring signals to the ratings agencies abroad by announcing that it will stick to its previously-declared fiscal deficit targets and sending even more reassuring signals to ensure enough happy voters at home, this budget falls between two stools.
Nowhere is the contradiction more apparent than in the alarming unreality of some of the government's numbers.
The government's tax collection targets are going to be very difficult to meet. In fact even those rely on heavy indirect taxation, which already grew by 34.8% last year and rely on multiple hikes on excise duties even as oil prices fell. Any economist will tell you that indirect taxes are essentially regressive; they hurt the poor more, since the poor and the rich alike both have to pay more for essential services. Instead of boosting the real incomes of the poor by cutting these indirect taxes, the Government has been meeting its fiscal deficit targets on the backs of the aam aadmi.
The revenue/expenditure balance sheet is not encouraging. In addition, the extra burden of the 7th Pay Commission awards and the grant of OROP will mean expenditures going up. The disinvestment targets mentioned in previous budgets have been completely missed by the Government. Where is the money going to come from?
At present, the external debt of the country is already at an all-time high of Rs 31.7 lakh crore, a number the Finance Minister carefully did not mention in his presentation. With exports down (having contracted for two consecutive years) and the world in recession, there's little hope of GDP growth coming from that quarter. And growth has slowed in all the key sectors in 2015-16 - manufacturing, construction, mining, industries, electricity and agriculture.
In fact, on disinvestment, the government managed to raise only Rs 25,312 crore last year against its announced target of Rs 69,500 crore. Despite this dose of cold water from the markets, it has again announced an ambitious target of Rs 56,500 crore for fiscal year 2016-17. Is this credible, or merely an example of faith-based budgeting?
On the positive side, one welcomes the increased allocations for Swachch Bharat (previously below the levels of UPA's sanitation budget!), roads and highways, MNREGA (though still below 2010-11 levels under UPA), and LPG for cooking by poor rural women. (I just hope the Government actually finds the money to fulfil these promises.) At the same time, as a member of the previous government, I couldn't help feeling vindicated to see the Government embracing UPA ideas it had earlier opposed, from strengthening the Adhaar platform and MNREGA, to welcoming 100% FDI in food processing.
But many of Mr Jaitley's budgetary cuts are a matter of grave concern - in food security (down by Rs 5,000 crore), fertilizer subsidies (Rs 2,000 crore), and higher education, where a derisory allotment of Rs 1,000 crore for the establishment on five new IITs has been hacked to a risible Rs 190 crore this year. The Ministries of Minority Affairs and Women and Child Development have taken a hit again. The central plan outlay for the Ministry of Environment and Forests, including the National Afforestation programme, has seen a budgetary cut of 66% from Rs 1,446 crore for FY 2015-16 to Rs 480 crore this year - and that too just after India's extravagant commitments at the Climate Summit in Paris, COP 21, for which no additional funds appear to have been earmarked.
But then making promises with no intention to fulfil them is not exactly unfamiliar territory for this government. Too many promises from previous budgets have not been executed or fulfilled. What happened to the Expenditure Reforms Commission announced in Mr Jaitley's first budget speech? What about last year's SETU (Self-Employment and Talent Utilisation) or the Atal Innovation Mission (AIM) which were announced with great fanfare last year but not funded or even mentioned this year?
The government's implementation rate of previous promises is hardly encouraging. Last year Mr Jaitley promised that 6 crore toilets would be built; the actual achievement is 62 lakh, or just over 10%, and not all of those have water or electricity.
And many of the promises are not new. Even though the government has budgeted a 45% increase in the allocation for central plans for agriculture including the Pradhan Mantri Fasal Bima Yojana, to Rs 17,849 crore this year, it is still lower than the Rs 19,047 crore allocated by the UPA for FY 2013-14. The UPA then provided for weather based crop insurance, agriculture insurance, Rashtriya Krishi Vikas Yojana, and horticulture mission. Clearly, there is nothing for farmer welfare that was already not provided for earlier. In fact, the NDA reduced the UPA's allocations last year and then increased it this year. Plagiarism is, of course, the sincerest form of flattery.
Some of the budget's omissions are also interesting. The government has raised taxes on tobacco products but not beedis - is it signalling that it's OK for the poor beedi-smoker to die of cancer but not the richer cigarette-smoker?
The expected amounts for bank recapitalization did not materialize. The Finance Minister could at least have offered us a roadmap for how he intends to get there. It is essential to reignite the banking system, afflicted as it is by severely stressed assets and manifestly unable to fund long-term infrastructure projects (so many of which are stuck at the implementation stage). The funds need to spur infrastructure growth (down by 12% from Rs 2.51 lakh crore last year to Rs 2.21 lakh crore this year) and address the problems of the banking sector are simply not to be found in the Jaitley budget. Insurance schemes are all very well, but they are not a credible substitute for the missing capital expenditure on agriculture which alone would help pull farmers out of distress.
While the Finance Minister clearly had his eye on an international audience in announcing some tax and banking reforms, he took his eye off the domestic public by sneaking in a tax on 60% of Provident Fund and pension withdrawals, which will hurt the salaried worker. Job creation has suffered under the Modi dispensation; it remains to be seen whether the measures announced in the budget will help create jobs for the 17.5 million who have found themselves unemployed under the BJP. Another 30 million will enter the workforce during the remainder of Mr Modi's term - what work will this budget help them find?
What will the effect of all this be on the rupee? During the election campaign Mr Modi had been withering about the decline in the value of the rupee, but it has fallen a further 16.5% on his watch. At Rs 58.50 when he became PM, it has now overtaken his age and, having plumbed the depths of Rs 68.85 in August, is well on the way to joining the BJP's famous margdarshak mandal.
On the whole, this strikes me as a Wizard of Oz budget - large, loud and formidable on the outside, but when you examine it closely, small, weak and unimpressive. The Prime Minister saw his budget as an examination. In this case, his report card will say: "Must try harder"!
(Dr Shashi Tharoor is a two-time MP from Thiruvananthapuram, the Chairman of the Parliamentary Standing Committee on External Affairs, the former Union Minister of State for External Affairs and Human Resource Development and the former UN Under-Secretary-General. He has written 15 books, including, most recently, India Shastra: Reflections On the Nation in Our Time.)
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