Budget 2018 has many positives for private consumption

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Updated: February 2, 2018 6:45:55 AM

Budget 2018: Budget 2018 is expected to be the last full budget of the current government, and there were some expectations (or worries) that the government might choose fiscal profligacy for political gains over fiscal prudence.

Budget 2018: It is usual to have a plethora of expectations from the Union Budget, and a yearning for so-called “big-bang” reforms and announcements. (Reuters)Budget 2018: It is usual to have a plethora of expectations from the Union Budget, and a yearning for so-called “big-bang” reforms and announcements. (Reuters)

Budget 2018: It is usual to have a plethora of expectations from the Union Budget, and a yearning for so-called “big-bang” reforms and announcements. Budget 2018 is expected to be the last full budget of the current government, and there were some expectations (or worries) that the government might choose fiscal profligacy for political gains over fiscal prudence. Fortunately, the government has demonstrated an admirable confidence in its own political prospects by coming out with a solid (not spectacular) Budget with several interesting announcements that should bring hundreds of millions of poor and less well-off into the ranks of actual consumers in the years to come, giving a fillip to private consumption. The role of a large and growing middle class in the overall economic and social progress of any nation is well understood.

While there can be debate on what threshold of per capita disposable income constitutes entry into the ranks of the middle-class, it would not be contentious to say that for a more inclusive growth, the ones currently below the poverty line or its fringes must be given an opportunity and requisite policy and financial support to convert them into consumers of at least the most basic basket of goods and services. This Budget should further help in meeting this objective.

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Of various announcements that stand out on this count, the most potentially impactful one is the launch of Ayushman Bharat Yojana that will target the poorest 100 million families. While the details of this scheme are yet to be studied, it envisages providing an annual cover of up to Rs 5 lakh per family, which is very significant. Expenditure on healthcare is the single-largest cause of keeping these millions in abject poverty. Money thus saved will have a very significant impact on their quality of life, and would lead to higher private consumption on non-healthcare goods and services.

Of the many initiatives for improving farmers’ incomes, one that has major positive potential is creation of a fund to focus on development of infrastructure for fisheries, aquaculture and animal husbandry. For small and medium land-holding farmers, adding these categories of saleable goods using the same landholding can lead to a significant increase in overall income, enhancing their purchasing power. Lastly, increased allocation for a broad range of infrastructure totalling nearly Rs 6 lakh crore should create additional jobs and a more even income distribution across India, leading to more geographically-balanced spending.

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While the Budget may not have any immediate and direct impact on private consumption (therefore, the retail sector), it enhances and creates a more solid foundation for adding hundreds of millions of currently poor Indians to the ranks of the consuming class in the future.

Arvind Singhal
Chairman and Managing Director, Technopak

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