The first budget of Modi 2.0 government has been presented by the first full-time woman finance minister. Nirmala Sitharaman’s budget speech had a hint of vision-presentation, instead of a one-year plan. If there was a question about this approach, the answer partly lies in the fact that the government has secured a massive mandate but a few weeks ago, which allows it the leeway for long-term planning.
In the season of cricket World Cup, it is perhaps apt that we use the analogy to make the point. Unlike the interim budget just before general elections, presented by the then ‘officiating’ finance minister Piyush Goyal, Sitharaman did not seem to be in a hurry of chasing an ‘asking run-rate’. Goyal’s interim budget, which was initially expected to be a customary ‘vote-on-account’, turned out to be a full-budget speech – with a symbolic ‘interim’ prefixed to it.
Sitharaman, on the other hand, delivered a carefully crafted speech – laced with poetry,
shayari, references to scholars, to historical figures and heritage – which indeed appeared to be setting a target than chasing one. No doubt, it had an imprint of foundation-laying, as is expected of an opening partnership in a fresh inning. There did not seem to be a rush to finish things off with a flourish, lest it was too late! And one can say, she did a fine job, if this was indeed her motive. No Quick Fixes
The foundation laying was evident in banishing big-bang, quick-fix, announcements. For the eager, tax-break anticipating class, there wasn’t any bumper discount; nor was there something spectacular for sectors that are likely to spur mass-sentiments. Instead, she was a mason-at-work, engaged in fundamental brickwork: deliberating on infrastructure augmentation, urban and rural development, metro network expansions, transit-oriented development, ease-of-living, education and skill-development; while administering a clever dose for capital augmentation (the lending environment).
The last one has been Indian economy’s Achilles Heel off-late, ever since IL&FS showdown caused a deadly panic. In any case, Goyal had given a lot to key sectors — farm and real estate — back in February. None of that is being taken away, and hence, there was no rush in the current full budget.
The difficult lending environment due to troubles in NBFCs, as also in banks to an extent, has been a roadblock for real estate in the past year. By taking some measured steps such as changing the regulator from NHB to RBI, as well as allowing a one-time partial guarantee for loan-loss to banks that acquire up to Rs 1 lakh crore of high-rated pooled assets from NBFCs, the thought has been clearly presented. It is a signal to the lending ecosystem that there are concerns, and that the bull needs to be taken by its horns. Goyal too had delved into this, by pronouncing easier lending for high-rated NBFCs. The present budget, however, makes it workable. We don’t think anyone is complaining on account of this. Additionally, Rs 70,000 crore of capital commitment for Public Sector Banks is welcome.
The other key aspect for the revival of the difficult housing sector is demand pickup. By adding another Rs 1.5 lakh interest deduction – taking it to Rs 3.5 lakh – the attempt to revive the sector is admirable. This, nonetheless, was one of the few short-term measures she took in her budget.
The longer-term game plan was well in evidence in the focus on infrastructure. Pronouncing Rs 100-lakh crore commitment over the next five years is a fine start. In a recent white paper released by Savills India, we had highlighted the need for large volume investments in infrastructure. It is assuring to know that the government considers it paramount.
India’s housing needs are complex. It may not be viable to solve the issues by merely hoping that each unit of the population will own a house of its own in the near future. By recognising the need for a focus on ‘rental housing’ and a clear commitment on developing ‘model laws for tenancy’ the signal has been given that the government holds a pragmatic view.
The efficacy will depend on the speed of implementation though, and we would be keen to see an implementation that is based on lessons learnt from the rollout of RERA. A further ambitious plan is that of providing 1.92 crore houses with toilets and LPG connection, as well as ‘har ghar jal’ by 2022 and 2024 respectively. These do sound over-ambitious at this moment, but are targets worth a try.
While there were other equally or even more ambitious announcements in the budget, we think the tenor and fabric of the philosophy is adequately highlighted through these few examples.
In a nutshell, it is evident that the budget has deliberately steered clear of radical and spectacular measures, choosing instead to concentrate on a 5-year plan, if not longer. There will, of course, be big scoring budgets in the near future, as elections start looming in various states. For now, however, a steady start to a metaphorical innings appears to have been made.
It is time to watch carefully and demand a strong implementation if this indeed was a roadmap budget.
Arvind Nandan is managing director, research and consulting, Savills India.