01 Feb 2018 20:18 IST

Fiscal deficit target has been breached and that isn't good

Higher government borrowing and spending will create inflationary pressures

This year’s budget has a clear focus on farmers, people below the poverty line, women and small businesses. Farmers’ earnings will go up due to the increase in minimum support prices and agricultural productivity will get a boost from the higher allocations to rural infrastructure.

 

The innovative health schemes, the proposed affordable housing fund and expansion in Ujjwala scheme will benefit the poor of the country, especially the women. There are several proposals that would create lakhs of new jobs. The tax cut for small companies from 30 per cent to 25 per cent, the benefits extended to textile, footwear and leather industries, doubling of allocation to food processing and liberalising of agri-exports will increase exports, employment and forex earnings.

Salaried people don’t have much to cheer about. There is a small increase in deductions, no relief on taxes and an increase in the education cess. But I am mainly disappointed that the fiscal deficit target has been breached and the target for next year (3.3 per cent of GDP) is higher than what was promised last year. Higher government borrowing and spending will create inflationary pressures, harden bond yields and prevent the RBI from cutting the repo rate.

(The author is Professor of Economics at the Indian Institute of Management Kozhikode)

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