The Union Budget 2017-18 is a blueprint that has outlined the plans of our government which is on a mission to transform, energise and clean India (TEC India). I feel the Budget is an inclusive one, cutting across a cross-section of areas, with emphasis on rural, infrastructure and skill development, enhanced by digital initiatives. This is a move in the right direction; however, it does fall short on delivering certain key expectations.
The Budget’s focus was expansive, across 10 distinct themes—farmers, rural population, youth development, poor & underprivileged, financial sector, infrastructure, digital economy, public service, prudent fiscal management, tax administration—a tall order.
The underlying tone of a transparent system of governance is visible in the government’s quest to improve the ease of India’s business credentials. This move to bring in greater transparency and objectivity in decision-making by improving the system of administration is a welcome step. A key expectation from the Budget was the announcement of policies and initiatives aimed at accommodating the 15-million-plus youth entering the workforce every year. While addressing the skilling aspect, the Budget is short on specific initiatives aimed at directly enabling job creation.
Some initiatives are worthy of praise, especially the ones around skill development, which focus on energising the youth to reap the benefits of technology that will give them greater avenues of employment. Some bold moves will result in job creation.
Key areas that stand out are:
* Abolishing FIPB, now there is direct thrust on automatic FDI;
* Containing the fiscal deficit at 3.2% of GDP—it will improve India’s standing in global markets;
* Halving of income tax base rate to 5%, should spur consumption at the bottom of the pyramid;
* Thrust on investments in the infrastructure sector—enhanced investments in railway and roads, allocation of Rs 10,000 crore for expansion of BharatNet,
classification of affordable housing sector under infrastructure, etc.
* Consolidation of 44 labour laws into four broad codes;
* Investments in rural infrastructure, farm productivity enhancement and poverty alleviation focused on creating a formal, cashless ecosystem by leveraging digital technologies;
* Identification of MSMEs as key growth driver of the economy.
The proposed capital expenditure on infra should have a positive effect across the supply chain and this will positively impact job creation across the human capital value chain.
The government has taken into cognisance the critical role of electronics manufacturing and has extended the M-SIPS and EDF schemes from last year.
The government’s priority of encouraging movement of labour to the formal sector reflects significantly in this Budget. While all these are expected to generate employment, details with regards to the various schemes announced are awaited.
Outside of the relaxation of base level tax rates and tax reduction for MSMEs, there was little by way of other tax sops and change in corporate tax rates. Specific measures to boost manufacturing/exports were conspicuously missing. The lack of clarity on the applicability of service tax and TDS rates on services rendered by a multitude of industries, including the HR services industry, was also a sore point.
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Though the Budget is constructive, most initiatives outlined are long-term in nature. The onus is now on the government to ensure seamless execution of the announced initiatives. The short-term implications remain to be seen. We should wait and see how on-ground execution pans out.
The author is MD & CEO, Randstad India