Typically, all these years, while the budget carried both economic and fiscal components, much of the review and comments were on the fiscal side- the various tax legislations, their amendments and revisions. This budget with its singular mission on setting the context of economic change has nothing of importance on the fiscal side and is thereby diverting everyone’s attention towards the very significant economic aspects. The paucity of noteworthy comments for this budget must be due to this over turning of the subject line.
In brief, the two segments the budget focuses on are 1) building of social capital for change, and 2) social investment for growth. Below is a review of both these focusses:-
Social capital for change
The major investments and objectives set out are:
- Affordable housing for 1 crore by 2019;
- 100% rural electrification by 2018
- High speed broadband availability in 1.5 lakh gram panchayats
- Safe drinking water to 28000 arsenic and fluoride contaminated areas
- Sanitation coverage beyond the current 60%
- Irrigation fund corpus being increased from Rs. 20,000 crores to 40,000 crores.
If these measures are implemented well, covering both the rural and the disadvantaged members such as those below the poverty line, dalits, women and the differently abled, then the capital formation should yield considerable results in the coming years.
Social investment for growth
The budget rides on the success of the Pradhan Mantri Gram Sadak Yojana (PMGSY) which has seenan improvement in road laying from 73 kms per day in 2014 to 133 kms per day now. The MGNREGA allocation has been increased to Rs.48000 crores and the National Agricultural Market (eNAM) increased from the current 250 markets to 585 markets. The National Skill Development Programme has provided insights for the government to launch the SWAYAM platform covering 350 online courses that are vocational and job yielding. Similarly, the ITI courses are being reviewed to fit them with the changed industry context thereby making them effective. In addition the SANKALP programme is to be benefit 3.5 crore youth. Farm lending to increase to Rs10 lakh crores.
The investment in skill building- both online and offline; creating infrastructure that would make farm produce easily marketable by enlarging the coverage and reach and increasing the quantum of farm lending should together make the rural economy grow and also provide gainful employment to them. This should spur some consumer spending in the rural sector.
This budget in a way is path breaking in terms of it accent on building the rural side- through investment that would yield longer term returns as well generating employment in the near term by building infrastructure- road and waterways and affordable housing.
While social focus is necessary to improve the conditions at home, it is equally necessary to focus on export earning sectors; if we are to sustain GDP growth of 8% per annum, exports need to grow at 15% per annum. IT is an important constituent of our export sector and is currently in an uncertain phase caused by the twin daggers in the form of Brexit and Trump’s triumph. Even though there is a move to earn foreign exchange through 100 travel destinations, it will not set off the impact from the current crop of export earners.
In the wake of the slowed growth after demonetization, the government took a bold step in stepping up social investment relying on the measures taken to bring better coverage of those in the tax net and also better recoveries of tax dues. The question is why then did they not have courage to roll back MAT to its introductory rate of 7.5% or even abolish it? Looks like the government had conviction on social spending so they did it; perhaps, there was not similar conviction on the corporate side.