25 June, 2021

That Fine Balance

The economics of political credibility is the tone of the budget

That Fine Balance
The intense pre- and post-budget debate is an indicator of the vibrant Indian democracy. Taxes and expenditure are the primary means by which the government takes from some and gives to others. It's a delicate task, as few want to give and most want to get. The elected government is supposed to implement the will of the people and the people have every incentive to oversee and influence the process. Since the FM has used the tax bonanza in handouts that target different groups of voters, it's a common reaction to call the budget 'populist'. But inclusion is a valid task of government. And people have an intrinsic sense of fairness—a thriving sector is willing to help one that is not doing so well. It only expects the help to be in sustainable and effective ways. Killing the goose that lays golden eggs or wasting its largesse leads to scarcity.

Fiscal policy has to make growth inclusive yet sustain it to reverse the threatened cyclical slowdown in industrial growth, while improving longer-run or structural growth prospects. How well has the...

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