The Narendra Modi government, it seems, has strategically changed tack and turned to the downtrodden, the poor, farmers and the middle class to balm their demonetisation bruises and, of course, capture the vote bank in the long run. Many have damned the Union Budget 2017-18 and have been vocal in their criticism. One should not forget that this was not a normal year and it was extraordinarily difficult to draw the contours of a calibrated budget in the most trying times. But Arun Jaitley appears to have done his homework well to present a balanced budget.
Coming after the demonetization, the 2017-18 Union Budget has decidedly been a sober affair. The budget speech was short on game-changing ideas. With crucial state elections looming, the Finance Minister preferred to play safe. There was an expected tilt towards expenditure on infrastructure, tax cuts for small enterprises and shots in the arm for rural households and the agricultural sector.
India‚Äôs economy moves mainly on four wheels-government spending, consumption, exports and private investment. This budget focuses on all the four. The Finance Minister knew well that exports had lost momentum due to a slowdown gripping Europe and the US. The situation could further worsen in the wake of unpredictable President Trump getting increasingly protectionist. The windfall from oil has gone into refurbishing the government finances and good times may end if crude prices keep inching up. India‚Äôs companies, even though cash rich, are refraining from investing.
It is for the first time that a budget (2017-18) was presented on the first day of the month instead of the last day.
It is for the first time that the Railway budget has been clubbed with the main budget. It is for the first time that 2017-18 budget has been modelled with revenue expenditure and capital expenditure by abolishing planned and non-planned expenditure.
Longest budget speech was made by Jaswant Singh in 2003, lasting 2 hours and 13 minutes.
The wordiest budget having 18,520 words was presented by Manmohan Singh in 1991 while the least wordiest budget (4,454 words) was presented in 1952 by CD Deshmukh.
Rajesh Srivastava, a leading economist and a banker who is currently working as CMD, Rabo Private Equity Fund, has reason to cheer at the prospect of increase in the flow of private equity into the country but at the same time fears that the new CBDT circular on ‚ÄúPlace of Effective Management‚ÄĚ which ‚Äúreneges on previous year‚Äôs assurance‚ÄĚ may prove to be detrimental to the inflow.
Banks flush with funds
Knowingly fully well that bank credit offtake is at its lowest in decades, the Finance Minister has proposed to pump in more money in the banking sector. He had no other option than stimulating demand with government expenditure.
Since infrastructure is still not ready for direct cash transfer, the leaky system continues to cater to the advantage of the vested interests. Poverty reduction efforts coupled with subsidies have drained the exchequer over the years. Competitive populism has led to cuts in funds for educational and health institutions which the poor access the most. No doubt that the farming fraternity has long been demanding the implementation of Swaminathan report on farm produce and fixing its procurement price on the basis of input costs but it still looks elusive.
Job creation opportunities through MNREGA are admittedly enormous and it was, therefore, irresistible to make the ‚Äúhighest-ever‚ÄĚ allocation to this head in this budget. The budget‚Äôs rural, MSME, housing and infrastructure thrust would hopefully jack up consumption and employment generation. The grant of infrastructure status to affordable housing will help lower the costs for builders and attract buyers, while the steps to reduce the capital gains tax for property sellers may wake up the sleepy real estate sector, comments Managing Director Virender Verma of Pareena Infrastructures. Individuals and MSMEs have been granted tax relief, possibly to recompense them for the post-demonetization strain.
One can say that vote politics too has weighed on priorities as Jaitley has not hurt any section but at the same time he has not restrained himself from taking hard decisions. The budget does not, however, inflict pain on anyone and is fiscally sound.
Budget makes some good moves on agriculture. In 2013-14, the last year of the UPA regime, the Centre‚Äôs total expenditure on just food and fertiliser subsidies, at 1,59,339 crore, exceeded the agriculture and rural development ministries‚Äô combined budget of 92,642 crore, inclusive of interest subvention on short-term credit to farmers. Four years on, in the latest Arun Jaitley‚Äôs budget that gap between the former (2, 15,339 crore) and the latter (158,784 crore) has narrowed down. Rural India in general and agriculture in particular desperately requires a substantial step-up in public investment, whether it is in roads, electricity, irrigation, telecom and broadband infrastructure, housing and sanitation, education or farm research.
Budget is exceptional in as for as support for rural roads (Pradhan Mantri Gram Sadak Yojana) in the current as well as coming fiscal, at 19,000 crore each, is more than double the 8,885 crore and 9,806 crore allocated in 2012-13 and 2013-14,
respectively. The budgeted expenditure of 23,000 crore for rural housing (Pradhan Mantri Awas Yojana) in 2017-18 is, again, almost twice the 12,982 crore that was spent in 2013-14. The creation of a Long-Term Irrigation Fund with a total corpus of 40,000 crore, a new Pradhan Mantri Fasal Bima Yojana that is certainly an improvement over previous crop insurance schemes in terms of coverage and sums insured (though the subsidy provision of 9,000 crore may prove inadequate), and crediting of MNREGA wages directly into the accounts of beneficiaries alongside efforts to link the programme with building of productive assets (farm ponds, dub wells, compost pits, etc.) are, no doubt, welcome initiatives.
The less cash budget
Proposals add up to a series of mutually reinforcing moves to build a digital payments ecosystem. The FM had a lot for digital payments to show the real intent of demonetisation as an initiative to make India a ‚Äúless cash‚ÄĚ society. At the heart of the budget‚Äôs digital strategy is a plan to put a thumb on the scale for the government‚Äôs own payment app, Bharat Interface for Money (BHIM), that facilitates electronic transfers between bank accounts. BHIM users can now enter their 12-digit Aadhaar number to make payments. The recently-introduced payment system has been buggy, but it has attracted 12.5 million people to download the app. The budget aims to get many more signed up with incentive schemes to bring different market participants together.
Moreover, a merchant version of the Aadhaar Pay system is likely to be launched soon. To stimulate its adoption in different situations, the government plans to mandate digital payments at petrol stations, hospitals and universities. Cash transactions over 3 lakh have been banned altogether. Moreover, the Indian Railways will no longer levy a service charge on train tickets booked online through the IRCTC website. The government is removing duties on point-of-sale devices and fingerprint readers and there are plans for 10 lakh point-of-sale machines to be introduced by banks by March, 2017 and another 20 lakh Aadhaar-based point-of-sale machines by September this year.
The budget proposes to have a Payments Regulatory Board under the Reserve Bank of India to regulate payment and settlement systems. Tax benefits to start-ups, relaxing the shareholding conditions for carry-forward of losses and other tax incentives are intended to stimulate entrepreneurial activity to round out the digital ecosystem.
The budget also makes room for some relevant infrastructure investment: Broadband connectivity to 1,50,000 gram Panchayats by the end of 2017-18 under BharatNet along with a DigiGaon initiative to be launched to provide tele-medicine, education and skills through digital technology. Overall, the government‚Äôs target is to achieve 25 billion digital transactions in 2017-18. This budget is a step in the right direction with overarching agenda of: ‚ÄúTransform, Energise and Clean India.‚ÄĚ