In the political calendar of India, the Annual Budget presentation is a key event. So, last week was consumed by the budget event and by now we are also done with the surfeit of analyses and opinions on the same. However, this year the finance minister’s thunder was stolen by the Adani story thanks to the Hindenburg report culminating with the cancellation of the Adani FPO, the announcement of which came late at night on the budget day. What could have ended up as a great budget day for the FM and the government, turned out to be a fifty–fifty day. Even otherwise, I have been feeling that Finance Ministry in the Modi Sarkar has always been treated uncharitably by commentators.
The budget presented by the finance minister last week was the Modi government’s 10th and Nirmala Sitharaman’s 5th in a row. If she presents the budget in 2024, which in most likelihood she would, Sitharaman will become the 1st full-time woman Finance Minister to complete her full term. Truth be told, back in 2019, when Sitharaman was anointed as the FM, even among BJP supporters, there were raised eyebrows. That she was a political lightweight unlike her predecessors and came across as a haughty, headstrong lady, an image which she continues to live with even today, were some of the reasons attributed to the scepticism around her appointment.
I had opined then that making Sitharaman the FM was an inspired choice by Narendra Modi and that she may end up being a surprise pack. My take was based on the following reasons. She hailed from a middle-class background with a grounded upbringing and therefore would bring in a sense of earnestness and commitment to whatever she does. She had a squeaky-clean image which I thought is important for any minister, more so for an FM. For the same reason that she was a political lightweight, she didn’t carry any past baggage and was not seen close to industrial groups or lobbies in India Inc or abroad – a point that can’t be said of earlier FMs of India. As a spokesperson of the BJP when UPA was in power, she did a fantastic job of articulating the opposition’s point of view through logical and measured viewpoints for which she would come meticulously prepared. This aspect demonstrated her diligence and seriousness in the job given. And finally, she did have an educational background in Economics and therefore was not completely alien to grasping macroeconomics, which I think is an important requisite for an FM.
On the flip side, I did feel that Sitharaman may not be a very creative or out-of-the-box FM but may just be an FM who would execute BJP’s manifesto and Modi’s vision diligently. In this sense, her priorities will be driven by what is the ideological framework of the party and its manifesto. Five years since her appointment and five budgets hence, even her sharp critics admit that Sitharaman has done a fairly commendable job as the FM particularly navigating the country through a global crisis. This can be borne out of the fact that there was hardly any material criticism of the latest budget. By and large, the criticisms came out of people’s compulsive and competitive positions rather than constructive prognoses.
Nirmala Sitharaman took over from Arun Jaitley (though Piyush Goyal was an interim FM for a brief while stepping in due to Jaitley’s ill health in 2019), who had a huge political heft in the Modi Sarkar. Sitharaman herself considers Jaitley as her Guru and mentor in politics. Jaitley’s balance sheet as an FM has GST introduction, the Bankruptcy Code and Banking clean up on the credit side and Demonetisation on the debit side. Though to be fair, Demonetisation was a purely political decision that had economic ramifications and so it should feature more on Modi’s balance sheet than on the FM’s. But for Jaitley’s way with people of all fronts, consensus building on GST and its eventual introduction, GST would still be a Work In Progress now. But one of the major issues of Jaitley’s period was the slipping of India’s economic growth since 2017 which didn’t get the attention it deserved back then. I vividly remember that in 2017, it was taken for granted that India will grow at 8% come what may and the question was what the government will do to touch double-digit growth consistently for a long period. But in the last 2 years of Modi Sarkar’s first term, the economy slipped considerably.
It was in the background of this dull growth that Sitharaman took over as FM in 2019. To be fair to her, just within one year into her tenure, she had to contend with the Covid pandemic which brought the entire world to a grinding halt in 2020. Navigating the country’s economy fairly smoothly through the pandemic must count as Sitharaman’s biggest achievement of her tenure. Even during the last three years of the pandemic, as a country, we have managed to be fiscally prudent and come out relatively unscathed.
Back in 2020 in the midst of the pandemic, most of the developed nations were doling out cash to their people to pump prime the demand. There were clarion calls from reputed economists on India too, to do the same. However, the Indian government decided on providing targeted support like free grains to the poor, MSME credit, etc rather than cash transfers to the people though the government through the now famed “India stack” could have done it easily and scored brownie points. Toeing the line of these economists, the opposition leaders too were clamouring for cash transfers. Looking back at the way the pandemic played out through uncertain crests and troughs, keeping the powder dry for the rainy day turned out to be a prudent strategy.
Identifying the issues in hand correctly which were a) No visibility on the endpoint of Covid with repeated waves, b) Supply-side problem due to lockdowns c) Less consumer confidence which means even if money was given, people were less prone to spending, the Indian government took a calibrated approach to handle Covid. If you remember, we used to have the FM announcing a slew of measures according to the developing situation almost every other month. While all this was happening, the government’s focus was also to provide monetary support to the vaccination program which in itself was a humungous task for a populous country like ours.
The result of this “drip” approach to handling Covid and its aftermath is that today we are in a far better situation to fiscally get back to the growth path even while being caught in the midst of another external crisis like the Ukraine war.
The 8% + growth which we were taking for granted in the last decade may be eluding us today and we may be in the 6-7 % range. Yet, in so many years, India has not been seen with the kind of optimism like it is being seen today. India has an uncanny knack of flattering to deceive as we have seen in the past many times. But the way the finance minister and her team handled the economy during Covid in a composed manner without taking a misstep and now re-wiring for growth with very high spending on infrastructure etc… is giving a sense of confidence that this time, India will live up to the hype.
There is still a lot to do and waving the victory sign too early is not a wise thing to do. But, for reaching up here, it is only fair that due credit is given to the FM and the teams in the Finance/related ministries and PM’s Economic Council.
Prime Minister Narendra Modi might have first used the term “Amrit Kaal” during his Independence Day speech in August 2021 in terms of a vision for New India for 25 years. But it is now I feel – Abki Baar Amrit Kaal.