Weeks before the presentation of the Budget for 2015-16, Union Finance Minister Arun Jaitley and top officials sought Prime Minister Narendra Modi’s views on allowing extra government spending that would have entailed an overshooting of fiscal deficit targets. This came even as the Finance Ministry’s own mid-year economic review tabled in Parliament on December 19, 2014, had made a case for “reviving public investment” and a review of the government’s medium-term fiscal policy to enable such additional expenditures.
“Aap nirnay kijiye (you may take the call)” is what Jaitley supposedly told the Prime Minister, according to an official who was present at that meeting. The response couldn’t have been less ambiguous: Modi was clear he didn’t want any deviation from the path of fiscal consolidation.
The response was on more or less similar lines in the run-up to the 2016-17 and 2017-18 budgets, with the pressure for showing “flexibility” on fiscal targets even more given there was no revival in private investments and the demand destruction that followed demonetisation.
Modi’s nirnay was again the same both times: There shall be no compromise on fiscal prudence, which was highlighted in his government’s very first budget presented on July 10, 2014. Jaitley had, then, stated that “we cannot go on spending today which would be financed by taxation at a future date” while emphasising the importance of “inter-generational equity” and not leaving behind “a legacy of debt for our future generations”.