04 Feb 2017 19:34 IST

Union Budget: Quantity over quality

Firm measures have been proposed for Digital India, the education sector and ease of doing business

This Budget, in many ways, is a first; it was the first Budget to be presented on February 1, instead of 28, the first time the Railways and General Budget were consolidated and Plan and non-Plan expenditure were not distinguished. Based on the theme TEC (Transform, Energise and Clean), it is probably the most reformative one in the last couple of years.

Three core areas discussed in this article are: the move to digital modes, education sector initiatives and the ease of doing business.

Going digital

To give the Digital India movement greater impetus, the Budget promotes the adoption of digital technologies across all activities of the financial ecosystem, with its expected transformational impact on the economy.

One of the major criticisms the Government faced post-demonetisation was that banning high-value notes overnight was a haphazard initiative for a country that is largely dependent on cash (68 per cent of the population), compared with others like China (45 per cent) and the US (14 per cent). This reliance on cash is because of the lack of a digital backend infrastructure, an issue addressed in the Budget.

Digitisation of transactions is to be taken up as a mission programme with a target of 2,500 crore transactions a year. To achieve this target, the Budget talks about the installation of 10 lakh new PoS (point of sale) machines by March and 20 lakh Aadhar-based PoS machines by September. For rural areas, the digital route will be through post-offices, fair-price shops, fertiliser depots, and so on.

The Budget also announced the launch of Aadhar Pay, a merchant version of the Aadhar Enabled Payment System. Other efforts include incentivising the BHIM payment app and establishing a new payment regulatory board.

Apart from the above, the Government is focused on overall ‘digitalisation’ of its services. Procurement of goods and services has gone electronic, through the launch of e-market-places. Efforts are underway to increase the e-assessment of income-tax payers in the coming year. To ensure the benefits of such moves reach the agriculture sector, an expert committee will be constituted to study and promote creation of nationally-integrated agricultural commodities spot and derivatives market; e-NAM will be an integral part of this framework.

To back up these transformed operations, the Budget talked about building digital infrastructure for rural India. By the end of 2017-18, high-speed broadband connectivity through optical fibres will be available in more than 1,50,000 gram panchayats under Bharat Net. The Finance Minister had also talked about a ‘DigiGaon’ initiative, which will provide tele-medicine, education and skills through digital technologies.

However, the Budget lacks a clear-cut plan on connectivity of urban and semi-urban areas. Digital India has had limited success, which caused India to slip two ranks last year in the World Economic Forum’s Network Readiness Index, where we rank 91 out of 139 countries.

Education sector

Here, the Government has, again, focused on quantity rather than quality. Major reforms and policy initiatives were aimed at improving access to education as well as to give a boost to skill development.

Education portal SWAYAM will initially support 350 online courses and provide access to good faculty for students living in backward areas. The emphasis given to skill development in the dual sectors of tourism and textiles is a step in the right direction as immense, untapped potential lies unexplored in both areas.

The formation of a national testing agency is a praise-worthy initiative; it will provide a one-stop location to prospective students and would also prevent duplicity of efforts by various organisations.

One area where the Budget was silent is the provision for quality in primary level education, with the emphasis being on higher level and vocational education. This is worrisome as the primary level is a feeder to the higher levels.

Ease of doing business

The third key area of the Budget is stimulation of growth by reducing hurdles in doing business. Reforming the labour market through legislative measures by simplifying existing labour laws into four codes based on wages; industrial relations; social security and welfare; and safety and working conditions is a good idea. To address the issue of availability of skilled labour, the Finance Minister announced the launch of the next phase of Skill Strengthening for Industrial Value Enhancement (STRIVE) with an allocation of ₹2,200 crore.

Tax for companies with an annual turnover of up to ₹50 crore has been reduced to 25 per cent. However, the Budget is silent on simplification of the regulatory framework to reduce delays.

To push entrepreneurial activity, the Government has outlined a provision of carry-forward of losses of start-ups, the condition of continuous holding of 51 per cent voting rights has been relaxed (subject to the condition that the holding of the original promoter/promoters continues). And the profit (linked deduction) exemption available to start-ups for three years out of five years is now three years out of seven years.

Overall, the Budget appears to have covered the key areas of reform. However, similar initiatives have met with implementation hurdles in the past. Hence, there is a need to have a clear-cut implementation roadmap if these aspirations are to become a reality.

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