The increased budgetary allocation to Pradhan Mantri Gram Sadak Yojana, MGNREGA and Pradhan Mantri Krishi Sinchayee Yojana, and the assurance to achieve complete rural electrification and rural housing has reaffirmed the Government’s pro-poor focus in the Budget. This is a huge impetus to revive growth in the informal sector after the demonetisation drive.
The Government has also reduced the tax rate for MSMEs with annual revenues less than ₹50 crore from 30 per cent to 25 per cent, which might boost the sector that employs the largest number of people. It has reduced the tax rate for people earning in the bracket of ₹2.5 lakh-5 lakh to 5 per cent from 10 per cent. This will result in an increase in disposable income, thereby boosting consumption and the GDP.
Digital India continues
The Government’s plan for digitisation has also continued. Booking through IRCTC will be exempted from service charges. Also, according to Arun Jaitley, CBDT has identified 18 lakh people who will be taxed according to the amount they deposited in banks post demonetisation. This will boost the direct tax revenue. And implementation of GST from July 1 will increase the indirect tax. The Government has placed a bet on tax buoyancy due to increased tax compliance, which looks achievable. Thus, the overall picture on the tax revenue front looks great.
On the expenditure front, a large discipline has been achieved leveraging JAM trinity and giving legal status to Aadhar. Now, achieving 3.2 per cent fiscal deficit by FY18 and 3 per cent by FY19 seems possible.
Apart from this, the Government’s decision to abolish FIPB is welcome. Even now, around 90 per cent of the FDI comes through automatic routes of the ministries. Thus, it only made sense to scrap it and allow the other 10 per cent through the automatic route, and spare investors the labyrinthine process of FIPB approval. This will help improve India’s ease-of-doing-business ranking.
This was also the first time where the Railway Budget was merged with the Union Budget. Considering this, the allocation of ₹1.31 lakh crore, an increase of 34 per cent to the Railways from last year, is a welcome step, given the dire state the Railways is in. There is also budgetary support of ₹55,000 crore to boost Railways’ finances.
Less emphasis on education and health
Though the Budget is laudable, there were certain areas which needed more attention. To recapitalise PSBs to comply with Basel III, only ₹10,000 crore has been given. This amount could have been higher given that books of the PSBs are highly stressed. The low investment in education and health sector is also a cause of concern. The Government could have increased expenditure in these sectors as they have consistently remained in the same bracket despite growing demand. Also, the Budget didn’t address, in detail, universal basic income and bad banks, which was proposed in the Economic Survey.
Overall, I think we must congratulate the Finance Minister for this Budget, which has come at a difficult time. He has tried to maintain the fiscal discipline and, at the same time, address needs for growth and development.
(Rakesh Kumar Yadav is a student of IIM Kozhikode.)