Budget 2018: Focus on rural sector is good economics

Updated: February 2, 2018 5:41:22 AM

Budget 2018: India currently stands tall in the global economy with stable political environment, a promising story for the economy against the backdrop of several structural reforms that is currently underway.

Budget 2018: The global economy is currently in a sweet spot and in the best position since the global financial crisis in 2008. Budget 2018: The global economy is currently in a sweet spot and in the best position since the global financial crisis in 2008.

Budget 2018: The global economy is currently in a sweet spot and in the best position since the global financial crisis in 2008. The commodity cycle is recovering, there is stability in economic performance in most geographies, and the geopolitical situation, though fragile, is not as vulnerable as was feared to be. India currently stands tall in the global economy with stable political environment, a promising story for the economy against the backdrop of several structural reforms that is currently underway. The finance minister, therefore, had a fair degree of space to chart the future course of India’s economic strategy.

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On a first view of his speech and announcements, it became clear that there is also a political reality that had to be factored in while approaching the Budget strategy. Having said that, I believe the government has stuck to its principle of pursuing inclusive growth for the entire economy and has also taken upon itself to drive growth with very significant public spending targets. The most important headline of the Budget is the massive allocation to the rural economy in very essential areas of livelihood, rural infrastructure, quality of life, education and health. The focus on rural investment is not only good politics, but also good economics as rural consumption is also the foundation of a sustainable economy.

Also Watch | Tax takeaways from Budget 2018 for the common man

The other very major focus area is the spending targets in infrastructure, including railways and roads. Even after 70 years of Independence, India continues to struggle with its infrastructure deficiency and consequential impact on productivity and costs. Therefore, the renewed focus on programmes like the Bharatmala project will be critical for the future. The areas where there is disappointment from the Budget is the relaxation in the target for the fiscal deficit to 3.3% rather than 3.2% set earlier. While it is not something that is fundamentally alarming, it creates a perception that the targets set for fiscal discipline may not be followed based on discretion of the government. The other area that needs more focus is on the strategic disinvestment process.

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