Finance Minister Arun Jaitley’s Union budget 2017 will be remembered, not just for its date of presentation but its attempt to curb down the flow of black money from the economic ecosystem. Although, the Finance Minister might have missed out on a few topics of discussion and hence has received a mixed reaction for the same. Earlier today, Prime Minister Narendra Modi praised the budget presented by his government for the year 2017-18 and claimed that it would lead the country towards development. He said that the year’s budget was aimed at strengthening the poor in the country.
Here is what Mr. Pankaj Patel, President, FICCI had to say about the budget:
“his budget would tremendously strengthen the economic muscle of the country. It is directionally correct, fiscally prudent and strengthens the governance fabric of the nation. FICCI compliments the Finance Minister on his vision for the economy which alongside economic growth also ensures economic justice. Growth without inclusion can be a liability for the country.”
“I think the biggest takeaway from this budget is the reform introduced in the area of political funding. The demonetisation move of the government was an attack on the stock of black money and the measures announced in the budget on electoral funding will help attack the root cause of corruption of India. FICCI had represented to the government for bringing in such measures that will enhance transparency in line with the tenets of good governance. I give full marks to the government for this bold and pragmatic measure”, added Mr. Patel.
In pursuance of its objective to double the income of farmers in five years’ time, the government has significantly enhanced the allocations under most of the agri-economy directed schemes and programs including those related to farm credit, crop insurance, soil health, irrigation, market infrastructure, dairy farming et al. “All these efforts including the all-time high annual allocation for the reformed MNREGA scheme will not only help improve the income levels in the rural areas of the country but also help generate a swathe of new jobs across vast parts of the nation. This is a clear boost for generating demand on a large scale”, said Mr Patel.
FICCI has been emphasising the need to have a strong education and skill development framework in the country in order to capitalise on the demographic dividend that the country has. The budget contains many measures that would move us closer to realising this. Be it the move to measure annual learning outcomes in the schools, setting up of an innovation fund for secondary education to encourage local innovation, ushering reforms in UGC for providing greater administrative and academic autonomy to good quality institutions, launching of the swayam platform for online courses and linking with DTH channels and enhancing the reach of Pradhan Mantri Kaushal Kendras – all these will considerably build on the gains made in the areas of education and vocational training and help empower the youth of the country to get gainful jobs. “We have been working in some of these areas and we will continue supporting the government in these endeavours”, said Mr. Patel.
With the inclusion of the Railway Budget in the main Budget, government has been able to focus on development of the transportation network within the country in an integrated manner. The major plans as outlined by the Finance Minister on infrastructure development will help improve the service quality as well as bring in greater efficiency in the operations of our railways, ports, roads and highways. “Another plus in the infra sector is the extension of infrastructure sector status to the affordable housing segment. Housing sector is a force multiplier with its linkages to almost 200 industries across the economy. FICCI had strongly advocated for special recognition of this potential and thanks the government for having made this move”, added Mr. Patel.
Financial sector being the backbone of the economy also got the needed attention in the Budget. FICCI welcomes the abolition of Foreign Investment Promotion Board as the institution was becoming increasingly irrelevant with as much as 90 per cent of the FDI inflows coming through the automatic route. This is again a testament of the administrations resolve to have more governance and less government.
The announcement to list PSEs in the Railways sector, launch of a new Exchange Traded Fund with diversified CPSE stocks and other government holdings along with the already indicated listing of the five public sector general insurance companies indicates a new philosophy with regard to disinvestment. FICCI support these governance and efficiency enhancing measures.
“On the banking side while the Finance Minister did allocate Rs. 10,000 crores for capitalising public sector banks, FICCI feels that this figure will have to be increased during the course of the next fiscal given the actual requirements of the banks and the need to support growth. Additionally, as was suggested in the Economic Survey, we look forward to the government’s plan to set up a Public Sector Asset Rehabilitation Agency. Such an institution, on which FICCI has shared its own research with the Finance Ministry, is the need of the hour”, said Mr. Patel.
One of the key objectives following the demonetisation drive is to promote the usage of digital payments within the economy. Continuing with its efforts to incentivise ‘going digital’ the government made some more announcements in the budget. While these were on expected lines, the setting up of a specialised Payments Regulatory Board within the Reserve Bank of India should bring into greater focus the important issue of interoperability as well as how the agility of FinTech companies can be gainfully leveraged by banks and financial institutions. FICCI has recently launched a platform to synthesise the viewpoints of all the stakeholders and will engage with the regulator and the government on this issue.
“The announcement to reduce the Income Tax rate for MSMEs with an annual turnover of up to Rs. 50 crore is geared towards expanding the tax base in the economy as well as giving a thrust to employment generation. This will benefit scores of small business units in both the manufacturing and services segments. It is a clear encouragement to businesses to move over to the formal economy”, said Mr. Patel.
The reduction in the tax rate for individuals in the lowest income tax slab will leave more disposable income in the hands of the people and will enhance consumption demand in the economy which had taken evident hit due to the demonetisation move. “On the face of it, this step may not appear significant, but a 50 per cent reduction in tax liability is a huge positive for the maximum number of tax payers of the country. The Finance Minister has gone the Keynesian way to stimulate growth in the economy through higher demand”, added Mr. Patel.