Nirmala Sitharaman’s ninth budget was, as the Americans would say, a nothing burger. The Finance Minister’s speech belied expectations that it would contain a robust response to the geopolitical churn the world is witnessing and rambled on into nothingness. Even the poetry she quoted, an evergreen aphorism by the Telugu dramatist Gurajada Apparao that the nation is not its soil but its people was a non-sequitur. Why does this delirium bother the nation on a Sunday?
The fact that even the government’s spinmeisters on friendly media were at a loss to find positives in the budget sums up the story. At day’s end, the capital markets pronounced their own irrefutable verdict on it by shedding 2.3%. What the people at large had been expecting was an impetus to the consumption economy to revive job creation. What they got was a weak soup of buzzwords like data centres, semiconductors, and rare earths. Even that was more in the nature of reheating yesterday’s meal to serve lukewarm to odd constituencies rather than to launch new beginnings.
If positives are scoured for, it would have to be the pet project of containing the fiscal deficit to 4.3% of GDP. Rating agencies will welcome this, as they have been doing for the last three years. But all the same, there has been no let-up in the flight of capital from India. Another weak positive is the pledge to raise capital expenditure from Rs 11.2 crore to Rs 12.2 lakh crore. The inference from this is that the government will continue to shoulder the burden of infrastructure building while corporate India stands by, cribbing about demand not being strong enough for them to invest. That’s been the story since Covid, and we are here because of the drift.
By way of new initiatives, the finance minister proffered a new push on semiconductors, branded ISM 2.0. This will build not just fabs but an entire semiconductor ecosystem, including equipment, input materials, intellectual property, and skills. An accompaniment to this is the proposal to build rare earth corridors. Sounds impressive. But, as results from ISM 1.0 have not yet manifested themselves, it would be wise to hold one’s enthusiasm. As for rare earths, that’s a holy grail the whole world is seeking to keep up with China. It’s a seeking rife with uncertainties, and India’s joining in it is more due to a propensity for lofty ideas than any real executing talent.
For data centres, another fad of the day, the Finance Minister is proposing a tax break to foreign companies building them in India. This tax holiday until 2047 is a staggering giveaway to fat cat foreign companies, even as due diligence is still being done in the West on their energy needs. One suspects that this sop, along with incentives and investment in fisheries, is a gift to Andhra Pradesh, where the NDA ally Chandrababu Naidu is in power.
On personal taxation and consumption stimuli, the budget is silent, having already announced revision of tax slabs and GST levies last year, with no great impact. The most generous thing to say of this budget is that it is a cautious one. Last year, Sitharaman expended herself by offering tariff concessions to please Donald Trump. Nothing came of them, and we have no more to give. That must explain the reticence in this year’s budget.