Kudos to the government for staying the course on its agenda for economic development, social equity and administrative reforms, which it had articulated three years ago. The government has taken several bold policy initiatives, including demonetisation, introduction of GST, and diverting a major part of the revenue as well as capital expenditure for the development of rural and farm sector.
Each of these initiatives has its own risk, which could potentially derail the government’s efforts to achieve economic growth and employment. However, these initiatives are imperative to provide a major impetus to the Indian economy, as also distribute the benefit of development to one and all.
The government’s focus in this Budget, once again, has been on the rural and farm sector, including rural infrastructure development, direct economic benefits to the poor and weaker sections of the society, and increasing the disposable income of low-income groups. The government’s continued focus on skill development and
employment will enable India achieve stable, sustainable and inclusive economic growth.
The government has really done well by proposing a substantial increase in its spend on the defence, infrastructure and housing sectors, which would trigger a major increase in demand for core sector industries like steel, cement and construction, which have been suffering from low demand over the last 3-4 years. The government’s recent step of demonetisation may have caused the GDP to slow down by 0.5-0.75%, but this measure would serve the nation well in the long run by creating a single and real Indian economy.
The budgetary proposals in reducing the tax rate for low-income groups as well as the MSME sector are a welcome move, but little has been done to reduce corporate tax rates, which would have helped Corporate India restart their investments. The government certainly deserves to be commended for keeping both WPI and CPI below 4%.
Additionally, finance minister Arun Jaitley’s announcement to keep fiscal deficit at 3.2% would help contain inflationary pressure, as also boost investment confidence of international investors. Strangely, the finance minister in his budgetary proposal did not focus much on the manufacturing sector or suggest any specific measures to strengthen Make inIndia.
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While the government has announced its plan to stimulate demand, the competitiveness of Indian goods and services and their affordability still remains an issue of concern. The various cesses, royalties, a cascade of levies/taxes and unaffordable freight cost continue to hit the competitiveness of Indian products.
The power sector has been given a complete go-bye! The travails of thermal and hydro power sector continue without respite. These assets, built at a phenomenal cost, need to be rehabilitated. With the Ujwal Discom Assurance Yojana (UDAY) reforms in place, power demand needs to be increased and all existing plants need to be operational before any new private investments come. Hydro sector is a major source of renewable energy and cannot be forgotten as a lost cause.
Private sector investment continues to dwindle, and during the last five years has reduced by half.
Public sector alone cannot fulfil the responsibility of future investments. During the recent years, the private sector has felt highly insecure and vulnerable. The government will do well to participate jointly with the private sector for major investments in infrastructure and core industries.
Unfortunately, there were no such proposals mentioned during the Union Budget for 2017-18.
One surely hopes that the government, in due course, announces comprehensive proposals for boosting the manufacturing sector, since perhaps these were not covered owing to the limited time the finance minister had for his Budget presentation.