The 2016-17 Budget was billed as a “make-up opportunity” for the government. The current Budget, much like the Indian economy, has exploited its potential only in parts. Despite lower oil prices and soft commodity prices, the government has been hampered by a weak global environment, low-performing legislature, and stretched corporate and bank balance sheets. Given this backdrop, while fiscal expansion would not have been looked down upon, the finance minister has chosen fiscal consolidation over a push to the economy, and more significantly betting on Bharat over India. The Budget has laid special emphasis on enhancing expenditure in the farm & rural and social sectors including healthcare, education, skill devel-opment, job creation and infrastructure.
Expectations are firmly entrenched that private capex will remain weak for the next two-three years. However, unlike the last year, when the government’s capex expanded to fill in the void created by lower private investment, planned capex is estimated to increase only by 3% to R1,464 billion in 2016-17. This could fall short of the requirement. It is crucial, therefore, that the government prepare a five-year road map of its capex vision and its financing plan. It will give much-needed clarity on the government’s agenda on capex spending. Higher allocation to transportation infrastr-ucture, steps to incentivise gas production and a comprehensive plan for nuclear power generation are progressive steps.
The government has continued its focus on infrastructure by increasing the allocation 22% to Rs 2.2 trillion. Through the year, a significant number of projects languishing due to various factors were also taken up for being put on track. To avoid capital being held up in stalled projects in the future, the government has proposed a Dispute Resolution Bill for the resolution of construction, PPP and public utility contracts, guidelines for transparent renegotiation of contracts, and a separate credit rating system for infra projects. These augur well for the sector.
Tax measures for relief to small taxpayers and promotion of affordable housing that were announced will incentivise them to spend more, boosting private consumption.