On Friday, 23 August, Finance Minister Nirmala Sitharaman redacted, revised – and essentially, mauled – a Union Budget presented little over a month ago. As TV scrambled for soundbites and news agencies released highlights, few paused to ask, how come?
This is a confession that our finance minister and her gnomes in North Block had made serious errors in writing policy, imposing tax rates, making sarkari spending plans, allocating money to states and reckoning overseas and domestic deficits seven weeks ago.
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Of course, another explanation is possible. That a lot of folks in this government likely suffer from collective amnesia. So suddenly, today’s Union Budget becomes tomorrow’s samosa-wrapper.
August Sitharaman vs July Sitharaman
Anyway, to amend the incompetence of July Sitharaman, August Sitharaman has given us a box of Band-Aids. Here is an example. Sales of passenger cars have slowed for 10 months, and in July, dropped 31 percent from the year-ago month. A little more than 200,000 vehicles rolled off dealerships, the fewest in 19 years.
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Carmakers’ lobby Siam wanted a cut in the Goods and Services Tax on vehicles from today’s 28 percent to 18 percent, compulsory scrapping of older vehicles, and implementation of tough emission norms to boost replacement sales. These were self-serving demands, which didn’t address underlying problems.
Never mind. Sitharaman’s ‘Band-Aid’ is to postpone a hike in fees to register new cars for a year (who cares, if nobody’s buying?), allow government departments to buy new cars for old (a fraction of overall demand), keep conventional as well as electric vehicles on the road (no-brainer), relax emission norms – in a word, blah.
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Some of these pins – which should never have been stuck, anyway – have been removed.
Undoing the Damage
Much of this, as you realise, is simply attempts to undo self-inflicted damage. Over the last five years, the government could have developed a wide and deep market for bonds. But well, Narendra Modi and Co would rather cavort with Article 370, tax raids and Hindutva than attempt meaningful reforms.
The vehicle slowdown is a symptom of a massive, economy-wide slowdown in demand. Data firm CMIE reckons consumer confidence now languishes at four-year-old levels: demand has contracted for banians, booze and biscuit packets.
But no fear, August Sitharaman is here with Rs 70,000 crore to oxygenate this wheezing system.
Without sweeping reforms in finance, the money will disappear fast, and as it goes, other sectors that could have used the cash better will be left hanging. There are no ifs and buts: this is an absolute certainty.
Meanwhile, to keep the mythical homebuyer happy and salvage a construction sector buried under the debris of decades of graft and greed, August Sitharaman has sternly told banks to lower mortgage rates. Pray banks follow this advice and home loan rates fall 0.5 percent.
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Anybody excited by this and rushing to book an apartment, do remember, most builders and developers are bust, and haven’t delivered apartments promised nearly 10 years ago.
It’s entirely possible that we should brace for yet another mauling sometime soon. Maybe a December Sitharaman will throw away the samosa wrappers of August Sitharaman to scare an even sicker economy back to health.
In a system with any accountability, July Sitharaman should have quit or been sacked once her monumental failures had been exposed. But hey, enough daydreaming. Get back to the job. If you still have one.
(The writer is a Delhi-based senior journalist. This article was originally published on 16 July 2015 and has been republished from The Quint’s archives on the occasion of Aruna Asif Ali’s death anniversary.)
