The Big Picture: Union Budget – Arun Jaitley’s roadmap
Finance Minister Arun Jaitley recently presented his 3rd budget amidst mixed response. While the focus is on agriculture and rural development, he also laid emphasis on infrastructure and public investment in it to kick start the flagging economy. Though the GDP growth rate has been pegged at 7.6%, in many sectors the growth is not encouraging. Meanwhile, the Finance Minister has laid out what he calls the nine pillars of the budget, which will be guiding light for him. The fiscal deficit target is retained, but the development agenda is not compromised. It lacks out-of-box measures, but comes with some major reform promises. There are obviously some turn offs, but overall the arithmetic seems commendable, particularly considering the additional fiscal burden likely to be added due to 7th Pay Commission award and implementation of OROP.
During 2009 crisis, it was the rural economy which insulated Indian economy and helped it maintain its growth rate. Having realized this fact, the finance minister has rightly emphasized on rural economy and agriculture. The Budget gives its thrust on strengthening the agricultural and rural India. Several measures proposed — including allocation of Rs 35,984 crore for agriculture and farmers’ welfare, Rs 86,500 crore for irrigation for five years, Rs 15,000 crore interest subvention for agricultural loans, Rs 5,500 crore for crop insurance, Rs 38500 crore for MNREGA, Rs 8500 crore for rural electrification — show this shift of focus, which will help boost farm sector growth and rural demand that have been hit by two consecutive droughts. Also, employment creation, socio-economic progress and long-term economic growth will also get a big push by these measures in the long run.
However, experts believe that rural distress is mainly caused by the loss of construction labour. Almost, 55 million workers are in the construction sector, who are mostly migrant workers. These migrant workers often head back to their villages when they do not find any jobs in the cities. This causes rural distress. The budget, however, has failed to take note of this. Although, MGNREGA is in place, it does little to help these migrant workers. Hence, these experts argue that the target which has been achieved by cutting down the plan expenditure is not a good thing. Fiscal space, measured in terms of expenditure/GDP ratio, has come down by almost 1% of GDP. This clearly defines the direction in which the government is heading.
Finance Minister, through this budget, has tried to balance both development and growth. However, for investments to grow, changes need not be the part of budget alon- GST for example.
The Budget gives a much-needed push also to the infrastructure sector. Jaitley announced Rs 2.21 lakh crore for the sector. Of the total, a sum of Rs 55,000 crore is allocated for roads and highways, which will be further topped up by additional Rs 15,000 crore to be raised by NHAI through bonds. The total investment in the road sector including PMGSY allocation would be 97,000 crore. It is also encouraging to see the Budget’s emphasis on affordable housing.
For the public sector banking sector, a sum of Rs.25,000 crore is allocated towards their recapitalization, but the amount is woefully inadequate, considering severity of the NPA problem. In addition, the Budget promises financial reforms, but no concrete measures are proposed for addressing the sector’s woes. However, to improve the efficiency of the banking system, the government has constituted the Banks Board Bureau, naming former comptroller and auditor general Vinod Rai as its chief. The board is an attempt to separate the functioning of the banks from the government by creating another entity in between to act as a link between the two.
Employment generation in the formal sector was explicitly mentioned in Budget 2016-17 through various means. Additionally, several sectors such as housing and transport have received a boost and would contribute to more employment. The different policies for entrepreneurship development such as amendments in Companies Act, entrepreneurship training in colleges and schools, and relaxation for small enterprises under presumptive taxation scheme would also aid setting up of new enterprises that generate jobs.
For healthcare, the extension of cover to Rs 1 lakh per family and introduction of Jan Aushadhi Yojana stores can be life-savers for poor families. Similarly, the initiatives on promotion of skill development, setting up of 1500 multiskill training institutes, and a financing agency for higher education are welcome for building human capital.
The Budget also continues on the path of simplification and rationalization of tax administration. The Finance Minister reiterated his commitment to providing a stable and predictable tax regime. Dispute resolution is sought to be strengthened under the Budget through various means and a time limit has been introduced for disposing of petitions on interest waiver. The increase in limits for cases under single-member Benches and creation of new Benches would also fast-track dispute resolution.
The budget however lacks concrete measures towards building efficacy in the education system and making it more learner-centric. The need of the hour is to improve the quality of Indian education, and focus should be on imparting faculty training, building robust assessment framework, more so at the school level. The budget is also silent on measures to further boost private sector investment in the education sector.