An interesting budget was announced by the BJP Indian government last week where it kept to the themes it has recently been propagating: a) A move away from the exception-based regime, that fosters crony capitalism and corruption, and b) getting India ready for the future by facilitating its transition to a formal economy defined by globally accepted rules or in other words to successfully make India embrace a market-economy. A key thrust of this latest Indian budget was also to further enhance the on-going urgency on shrinking the cash economy in India as part of this government’s overall package on good governance, as it believes that in doing so it will help establish audit trail of private & public funds and instill overall sophistication and economic discipline. So naturally, demonetization, which almost overnight forced a large segment of the population to switch to digital money – a move which is still quite debate able both from the stand point of popularity & its economic rationale – was reinforced by way of announcing strong punishments for the non-conformers. However, to take strong measures like these the government of the day needs to enjoy a level of confidence in itself that the public trusts it as a reliable custodian of its money and clearly the BJP thinks that the Indian public does – This last weekend’s state election results though would be a good barometer to ascertain whether or not its confidence is misplaced!

Agriculture was given special attention, as even today in India, agriculture is the single largest employer, accounting for nearly one in two people in the workforce. BJP government argued that previous governments have been ignoring Indian agriculture by focusing more on industrial policy changes (post 1991 reforms) thereby leaving it behind in terms of integrating Indian agriculture into the world economy. In its latest announcements it unleashed a plan for the agriculture sector to transform India into a major global food-grain economy and also at the same time to further enhance productivity and value addition - through subsidies, support programs and incentives - in the national horticulture output, which in India has been outperforming the food-grains side for more than three years now. In essence, through these new policies and monetary support programs, the government aims to calibrate transition of the Indian farmer to a market regime.

In addition, the scope of the crop insurance scheme introduced last year was more than doubled. Also the scope of e-markets established last year for trading agricultural products was significantly enlarged to ensure that the government’s promise to introduce a model contract law, commodity derivatives, and financial hedging instruments for farmers is kept and a step, which will essentially protect the Indian farmer against market volatility and financial risk.

Further, the budget reflected a new Indian approach to public-sector reforms – A promise to put in place a new labor code; a new tax policy that rewards honesty; new set of accounting norms based on capital and revenue expenditure to ensure better monitoring of outcomes; and a new monitoring cum oversight mechanism on poll-funding, which if not transparent can often turn out to be a source of ‘black money generation’ within the political parties’ election funds. Thereby creating a source that not only undermines true democracy but also ends up destroying the very roots of democratic efficacy. On the social sector, we heard Mr. Jaitley make a lot of noise on how the India Census 2011 showed that while the Indian economy had traded up materially, the inequality level in the country has been rising. A phenomenon, which is undesirable as it leaves the poor further behind, creates social stress lines and in many ways holds future GDP growth to ransom. And to counter this, for the first time in the history of Indian politics, direct promises were made to the poorest of the poor to supply them with free housing and affordable electricity. Only time will tell whether these would be successfully kept or not.

Lastly, on defense expenditure, the increase in allocation by more than 12% though was expected, still quite disappointing. It depicts a mindset that continues to cater to and thrive on hegemonic designs and war mongering. India is already amongst the top 7 spenders in the world on weapons & armed forces, and by continuously growing every year its defense spending even more than it grows its annual GDP, it is surely setting the wrong tone for peace in South Asia!