A push in roads construction will boost the economy, like it always does.

FINANCE MINISTER Arun Jaitley seems to have been third time lucky this year. This is his first budget which has broken out of the mould of the past. The proposals for 2016-17 give little in the form of an impetus to investment, but he has managed to  stick to the fiscal deficit goals laid down in the Fiscal Responsibility and Budget Management legislation. The very fact that India has kept to its fiscal deficit target of 3.5 per cent is bound to enthuse global credit rating agencies, for whom meeting this criteria is a vital factor in giving a country a high investor rating. It is a different matter that these same rating agencies remained clueless about the viability of leading western financial institutions just before they crashed and burned in 2008. Nonetheless, it improves the investment climate in India in the eyes of foreign corporates.It will also please RBI Governor Raghuram Rajan who has been persistent in pleas for the government to conform to the fiscal deficit targets. In turn, the central government will now expect the RBI to oblige with cuts in interest rates, which may possibly provide a stimulus to kick-start the investment cycle.The second achievement has been the effort to carry out tax reforms, though these are rather piecemeal and patchy. Undoubtedly, however, Mr Jaitley is finally trying to take power out of the hands of the tax official and bring a system where there are less discretionary powers and thus less scope for corruption. The decision to avoid any more retrospective taxation is also welcome, as are the moves to create a better dispute resolution mechanism to reduce tax litigation.The third positive element is the focus on raising public investment in roads and highways. The investments are pegged at a massive Rs 2.18 lakh crore, though this includes the funding for the railways. A push in roads construction has always provided an impetus to the economy as it did when Atal Behari Vajpayee launched the Golden Quadrilateral project.On the other hand, there is virtually nothing for exporters on the grounds that global headwinds are weak and the country needs to focus on the domestic market. This is a rather defeatist approach as exports are clearly a drag on the economy currently. It is surely time to provide support to export industries which had been growing consistently till about two years ago. The plans for the agriculture sector and the rural economy appear to be more political grandstanding with an eye to the forthcoming state elections, as many targets seem unachievable like the expansion in irrigation over 80.6 lakh hectares. Besides, the aim of doubling farm incomes in five years is laudable, but not possible unless minimum support prices are raised sharply. This could, in turn, lead to a spiralling of food prices and raise prices significantly. Interestingly, the budget proposals also highlight the fact the highest-ever allocation of Rs 38,500 crore has been made for the MGNREGA, UPA’s flagship programme which had been severely criticised by the BJP before winning the elections. It has now been adopted, wisely so, by the NDA as a scheme that can alleviate the problems of the rural populations after two years of failing monsoon.Yet the biggest lacuna in the budget is any real stimulus for the creation of jobs. Barring the proposals for sops to fresh recruitment by companies, there is hardly any incentive for increasing the setting up of manufacturing units. Companies will hire new employees only when they are needed and not just to avail of these relatively minor benefits. In the roads sector, for which big public investments are being made, employment is available largely on a temporary basis and for unskilled workers. The only push to manufacturing, and hence large scale employment, in the proposals are the excise concessions being given to sectors covered by the ‘Make in India’ scheme.As far as the recapitalisation of banks is concerned, the amount of Rs 25,000 crore is far too little compared to the lakhs of crores of stressed assets in this sector. At the same time, the effort to move forward on a new insolvency code as well as the plans for the legislation to prevent illicit deposit scams that ensnare many is laudable. The proposals have little succour for the common man facing rising prices especially of food products. The cost of services will go up across the board with the new 0.5 per cent Krishi Vikas cess. The middle class may welcome the new provisions for pension schemes and the higher deduction for housing loans,  but there is little that is heartening for a segment that used to be the traditional constituency of the BJP. Even the crash in world oil prices has not been passed on by way of lower petrol or diesel prices to consumers. In this context, it is amazing to find a special scheme proposed to lure foreign oil majors to invest in highly expensive projects of deep sea and ultra deep oil and gas exploration. At a time when oil prices are at historic lows, no oil company is likely to venture into the highly risky and costly job of deep sea exploration. Such ventures become cost effective only when prices are ruling at high levels. There are some definite plus points in the proposals, like the scheme to provide LPG stoves to women in rural areas as well as the plan for the modernisation of land records and the digital literacy mission. The allocation for the social sector has also been raised significantly, clearly in response to severe criticism over the cuts made last year. However, it abounds in a mass of trivia about individual concessions especially on the tax side. Mr Jaitley’s third budget is thus a mixed bag. It is a definite departure from the past in terms of presentation, and also in firmly adhering to fiscal goals. But it lacks a holistic vision and, most importantly, fails to provide the much-needed push to investment and employment growth. In the absence of such a stimulus, it may be difficult for the economy to reach the goal of a high growth path of 8 to 10 per cent in the years to come.