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Applause and the fine print -Devadeep Purohit
-The Telegraph

Arun Jaitley today drew loud cheers from the fiscal conservatives as he displayed "prudence" and stuck to the fiscal deficit - which captures the government's borrowing requirements - target of 3.9 per cent of the GDP for 2015-16 and pegged it at 3.5 per cent of the GDP for 2016-17.

As the achievement came despite all the problems that the Indian economy faced - the Economic Survey presented details of the hardships - and without curtailing expenditure, the finance minister won accolades.

Jaitley's willingness to reduce the deficit further despite the burden on the exchequer on account of the recommendations of the Seventh Pay Commission and implementation of the one rank one pension scheme earned him some extra points. In this euphoria, his decision to set up a committee to assess the need for sticking to such fiscal targets in future was glossed over.

The BJP's spin doctors, smarting under the ignominy of the defeat in the Bihar Assembly polls and repeated attacks on the party for being elitist, were also ecstatic with the budget, claiming it to be a one for the poor and the deprived with special thrust on agriculture.

Amid the excitement of the budget day and the raining of numbers all around - including shedding of points by the bellwether indices on the bourses - some other facets of the third budget by Jaitley got crowded out.

At a time there are doubts about the size of the economy, measured by the GDP, even in the policy circles, the celebrations for meeting the fiscal deficit target - described as a proportion of the GDP - can look amateurish. The GDP growth rate of 7.6 per cent is suspect according to some economists as it has not been accompanied by a higher tax-to-GDP ratio, credit off-take from banks or a spike in freight movement.

Besides, one cannot also forget how he ended up meeting his tax revenue target - and thus contained the deficit number - this fiscal and whether he could rely on the same model next year for a near 12 per cent extra mop-up.

A look at the numbers at the receipts side of the budget reveals that Jaitley missed out on meeting the targets that he had set himself for corporation tax and income tax collection by around Rs 45,000 crore. The loss in direct tax collection was bridged as "people like us" kept paying additional excise duties on fuel bills, each time the price of crude oil fell in the international markets.

The government may have its logic on pegging the fuel price at a particular level to keep emissions under check or prevent overheating of the economy, but there remains a question on whether one can claim credit for achieving revenue targets if it is driven by a windfall.

Will it be possible next fiscal?

Unlikely - as the major oil producing nations have realised that lower production can help them prevent further southward movement in prices. Besides, with elections due in five states this year, including Bengal, and two more - Uttar Pradesh and Punjab - next year, the possibility of frequent jacking up of excise duties on fuel would be easier said than done in the coming months.

Elections are important for all the political parties and more so for the BJP-led NDA, which came to power in 2014 with a clear mandate but seems to be in a spot in the past few months.

Although the BJP was gloating over Jaitley's fiscal prudence, the finance minister's one-hour-and-forty-one-minute budget speech read more like a political statement of a party that is desperate to change the people's perception about it. As Jaitley was reading his speech, the thrust on health insurance for the poor, LPG connection for BPL families, farmers' welfare, irrigation initiatives, rural credit and rural roads was mentioned in great detail.

Then came the announcements like Rs 38,500-crore allocation on MGNREGA along with the claim of it being the highest (the claim, however, was wrong), a special scheme to promote SC/ST entrepreneurs and a skill development programme for minorities. It was evident that more than India, Jaitley was focusing on Bharat, and the attempt was to present an inclusive approach, a fact that party spokespersons kept stressing through the day and thanking the finance minister for setting the right priority.

In Part B of the speech, the section with tax proposals, Jaitley rolled out several provisions - like tax on dividend beyond a limit, surcharge on the super-rich, extra tax on high priced vehicles - which gave an impression that the party was keen to take more from the Richie Rich.

It was clear that following the lessons of the Bihar polls, where the BJP faced the problem of being perceived as a rich man's party, he was trying to send out a signal that he believed in progressive taxation - meaning more tax for the rich.

The absolute numbers, accompanying the announcements on new schemes for poor, also gave an impression that Jaitley was keen to chart new territory for the party by loosening the government's purse.

The intention, indeed, marked a difference and many said it was the best budget from him.

On closer scrutiny, the numbers tell a different story. Though Jaitley had the intention of giving more, the allocations affecting the poor and the needy weren't much, if the absolute numbers were presented as percentage of GDP. Besides, there remains a doubt whether he could release even this sum if his revenue arithmetic goes awry.

But, all's not lost. He still has two more chances.