Though markets dismissed it as a non-event, after a sharp 800-odd point movement during the day thanks to a seeming lack of big ideas and impossible tax targets, the Budget’s biggest achievement is that it looks doable. Rolling back the retrospective tax would no doubt have moved the market, as this newspaper recommended on many occasions, but it would have riled Parliament since this would have challenged its authority to pass bad laws, so an acceptable half-way house was put in place. The retro law remains in place, but no fresh applications of it are to be made in a casual manner; as for the existing
R2 lakh crore-plus of tax demands based on this, they will be dealt with by the courts or various dispute resolution fora—the key here, of course, will be to ensure the government doesn’t play the heavy as it has on
Vodafone’s arbitration demand, and at least allows them to be arbitrated.
As in P Chidambaram’s budget, the tax target is unlikely to be achieved, especially given the R14,745 crore of tax giveaways—to cite one instance, excise duty collections are slated to rise 15.4% as compared to last year’s 1.7%. The saving grace here is the huge cushions which, it has to be said, were available to the UPA as well—which means the government needs to be decisive for even the airbags to inflate. The R64,425 crore divestment target includes just R6,500 crore of the SUUTI shares—worth around R54,000 crore currently—and can easily be stepped up when taxes fall short. The R25,000 crore or so targeted from spectrum sales—that’s after removing the R20,000-odd crore the government will get from annual licence fees—will require defence minister Jaitley to come to the aid of finance minister Jaitley. Given that just a third of all 2100 MHz—popularly called 3G spectrum—has been used so far, unless the defence ministry vacates the rest, the target isn’t going to be met; this is the most valuable spectrum, so it needs to be auctioned.
If the criticism of the Railway budget, or other plans such as the Ganga cleaning one, is that they rely too heavily on PPP—which doesn’t have the capacity to shoulder the kind of risk it needs to—the finance minister has promised to develop more sophisticated models of contracting along with a suitable dispute redressal mechanism. This is easier said than done, but given the very large number of big infrastructure