Once again, everyone has their eyes on the Finance Minister and what he will bring to the table in this year’s Budget. It has been evident from the dismal reports of the past few months, that the country’s rural economy is not in the best of shape.
The area under cultivation for crops is steadily declining, while both the farm and non-farm wage rates are at their 10-year low. The importance of the rural economy was reflected in the last few State assembly elections. This increases the necessity for the government to focus on the rural sector, keeping in mind next year’s general elections, as the results aren’t instantaneous and don’t produce the desired effects in a year.
Focus on rural economy
Budget 2018 needs to ensure that the rural economy picks up once again, and must focus especially on building rural infrastructure. There should be special provisions for building state-of-the-art post-harvest infrastructure, including warehousing facilities and cold storages, so that farmers can realise the maximum benefit from their produce.
This will ease the pressure on people engaged in agriculture and help reduce the high farmer suicide rates currently prevalent in the country.
Apart from post-harvest measures, the government should focus on other aspects of rural infrastructure, such as roads and irrigation facilities. Increased and easy availability of agriculture and credit insurance can help address the distress point for people dependent on agriculture in rural areas.
A boost to the rural economy will also encourage the FMCG industry, that is pinning its hopes on recovery in the rural markets after the effects of demonetisation and GST. While the previous year’s Budget had seen 2.6 per cent expense allotted for agriculture and 6 per cent for rural development, this year’s Budget could push these figures further up.
Employment growth
Employment growth should also be one of the major focus points for Budget 2018. Spending more on health, education and skill development can help the government reduce unemployment in the country.
Allocating funds for the ‘Make in India’ programme and skill development schemes such as ‘Pradhan Mantri Kaushal Vikas Yojna’, ‘Sankalp’, ‘Udaan’ and polytechnic schemes will prove to be beneficial for overall employment conditions.
There is a need to promote public-private partnerships, especially in the health and education sector, where it can not only provide enough employment opportunities to the youth but also benefit society.
Expenditure on manufacturing and infrastructure such as roads, railways, power and agriculture-based activities should kick-start an employment-intensive growth phase.
Similarly, setting up of more manufacturing zones or product clusters could help. These clusters need to be set up keeping in mind the sectors which promote the highest levels of employment. With MSMEs employing a huge proportion of workers, relaxations on compliance costs and tax should be a priority.
Lowering corporate tax
Job creation depends heavily on the private sector. But today, India has one of the highest corporate tax structures. The statutory tax rate is around 34.61 per cent, which is more than 10 per cent above the world average. Lowering it for the labour-intensive small firms will certainly generate more jobs.
Accelerated depreciation is used by the government to incentivise big industries, but the resultant increase in automation may lead to a reduction in employment. Reducing such incentives and exemptions for capital-intensive companies can allow more labour employing companies to come up.
In the end, as Finance Minister, I would like to keep the fiscal deficit in check. The past year has not been a financially strong one, as revenues from GST still have not stabilised and there is a shortfall in non-tax revenues as well.
With disinvestment receipts bridging the gap a little, it’s important to ensure that all possible measures are undertaken to prevent the deficits from exceeding by a big margin, which might result in a possible reversal of the recent credit rating improvement.
The measures mentioned above should help the Budget bring financial stability and provide opportunities for an all-round growth phase with special focus on rural development and job creation.