​​​
  1. Budget 2017 big bets: Arun Jaitley must make it attractive for private sector to invest in infrastructure, housing

Budget 2017 big bets: Arun Jaitley must make it attractive for private sector to invest in infrastructure, housing

Budget 2017 is expected to be a ‘big’ budget. With GST on the anvil and demonetisation already undertaken, the ground has been laid for the government to announce some big-bang measures for promoting investment and lifting the economy to a...

New Delhi | Published: January 26, 2017 6:35 AM
According to a PwC report, India will require investment to the tune of  trillion over the next seven years to meet its infrastructure and housing demand, of which approximately 70-80% of the demand will come from housing. (Reuters) According to a PwC report, India will require investment to the tune of trillion over the next seven years to meet its infrastructure and housing demand, of which approximately 70-80% of the demand will come from housing. (Reuters)

Budget 2017 is expected to be a ‘big’ budget. With GST on the anvil and demonetisation already undertaken, the ground has been laid for the government to announce some big-bang measures for promoting investment and lifting the economy to a higher growth and employment-generation trajectory. The forthcoming budget will be perhaps the last chance for the Modi government to usher in necessary reforms to stamp out corruption and the concomitant black economy. Some more reforms of the direct tax regime and the FRBM, on which a high-powered committee will have submitted its report at the end of December 2016, may also be on the anvil in this budget which will be presented amidst the turbulent global environment. These measures, which will be seen as a follow up to the large number of incremental measures across a wide range of sectors taken over the last 30 months and some bold structural reforms like the GST and demonetisation, could also yield a strong electoral lift for the NDA as it approaches the four provincial elections lined up for 2017. The forthcoming budget will surely be not an ordinary one.

The writing on the wall is that this budget will be a follow-up on the recent demonetisation exercise and, hopefully, also a major step towards the implementation of GST. The finance minister could also take advantage of the larger fiscal space available to the government as a result of the demonetisation, higher indirect tax collections and the recommendations of the Committee on FRBM to announce major increases in public capital expenditure that could trigger the tepid investment cycle of the present. In this context, the finance minister could consider the following as focus areas for the upcoming budget.

Infrastructure and housing

According to a PwC report, India will require investment to the tune of $1 trillion over the next seven years to meet its infrastructure and housing demand, of which approximately 70-80% of the demand will come from housing. The funding gap will be the primary challenge, and new avenues of funding like credit enhancement schemes for key projects and development of strong bond markets would be important steps for generating alternative capital. To meet the funding needs, government will need to proactively work on attracting private sector investment in this sector.

You May Also Want To Watch:

Employment

India adds nearly 1 million people every month to the workforce. All this is combined with the challenge posed by disguised unemployment in the agriculture sector and bad working conditions in the unorganised sector. According to the Economic Census, the numbers for the percentage change in employment for various key industries are not encouraging (as shown in the accompanying graphic). The only way to prepare the labour force for new jobs is intense reskilling and reimagining India’s education; without this, India’s demographic dividend is not going to be realised. The government should incentivise industries such as robot technology and futuristic cars.

Exports

India’s export growth has been lacklustre since 2012. Worse, the country is on the verge of losing its competitiveness in manufacturing. This is on account of the high logistics costs, combined with poor productivity. If this continues, then the increase in local demand will primarily benefit foreign producers and cause a trade-deficit problem. Defence and MSME sector offer some hope in terms of renewing the competitiveness of the Indian economy.

budget-graph

Cashless economy

In November 2016, the government initiated demonetisation of 500- and 1,000-rupee notes to curb black money and fake currency. An important impact of this step will be on cashless payments. These will pick up, and the government will have to support this progress by incentivising e-payments. According to a government website, Electronic Transaction Aggregation and Analysis Layer (eTaal), 3.53 billion transactions were done in 2014, which almost doubled in 2015 to 6.95 billion. Given the preference of Indians for technology, this figure will increase manifold after demonetisation. Giving adequate and right incentives to companies operating in this domain will be an important signal to the world in India’s journey from developing to developed world.

E-commerce

With India at the cusp of a digital revolution, there is a need to provide the necessary ecosystem for this sector to flourish. Incentivising this sector will not just benefit the e-commerce companies by further accelerating their growth, but will also position India as industry-friendly and attract more investments from foreign investors which, in turn, creates a ripple effect by generating infinite employment opportunities. Introducing tax incentives for start-up employees and funding of start-ups can be some initiatives which will help this sector immensely.

With this background, Budget 2017 is an opportunity for the government to outline its priorities for the year to come.

Rajiv Kumar is founding director, and Palakh Jain is senior fellow, Pahle India Foundation

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

  1. I
    Indra
    Jan 26, 2017 at 7:14 am
    Arun Jaitley rather must find a way to make old as well new entrepreneurs get into greenfield manufacturing projects for meeting the products requirements of each and every sector. Only with manufacturing units coming up from rural India to industrial clusters around towns can provide employments. However, Indian government requires to have a seaparate ministry for only manufacturing with a successful technocrat manager such as L&T AK Nayak heading it.
    Reply

    Go to Top