Electorate not forgotten in India's pro-business budget

THE Indian budget presented in parliament on Feb 28 by Finance Minister Arun Jaitley gives substance to Prime Minister Narendra Modi's view of where he wants the country to go and yet has to tread carefully between difficult choices. It caters to the wishes of big industry, its major supporters, but is aware of the power of the larger electorate in shaping political destinies.

The important concessions to industry are a future reduction in corporate tax from 30 per cent to 25 per cent, additional sale of shares in government-owned companies, making it easier to close a losing business, a boost to investment in infrastructure, reducing subsidies by targeting them better, and a fund to help micro and small enterprises, which account for 90 per cent of India's industrial employment, modernise.

Equally important factors: investment in agriculture is the lowest in years; investment in health, education and rural employment has fallen, as has the ratio of tax income to gross domestic product (GDP); and no tax reliefs for the middle class and the poor. The constraints the government will have to work under include a greater share of tax revenue for the states under the award of the 14th Finance Commission, doubts about how it would balance its budget deficit in future in view of a widely expected upward revision of government salaries this year, and an easing of the spin-offs from the fall in oil prices.