Union Budget 2017: Demonetisation had raised expectations for a game-changing Budget, says Biocon’s Kiran Mazumdar-Shaw

Published: February 3, 2017 5:55:54 AM

The demonetisation move just a couple of months ago had raised expectations of a bold, game-changing Budget.

The Budget focuses on several of the economic and social goals that the Modi government has been pursuing.The Budget focuses on several of the economic and social goals that the Modi government has been pursuing.

Finance minister Arun Jaitley has delivered a Budget that ticks several boxes. The Budget focuses on several of the economic and social goals that the Modi government has been pursuing, such as attracting foreign direct investment, reducing black money in the economy, skilling the youth, boosting rural infrastructure, encouraging medium and small enterprises (MSMEs) and creating a digital economy.

The demonetisation move just a couple of months ago had raised expectations of a bold, game-changing Budget. The finance minister, however, presented a balanced one and operated with fiscal prudence within his zone of comfort. The upsides provided by the impending GST implementation as well as imminent remonetisation perhaps explain this cautious approach. There were certainly no negative surprises, and those pleased the stock market, with the Sensex responding with a nearly 500-point rally.

Fiscal prudence

Given rising crude oil prices and challenges on the revenue front, the finance minister decided to balance between growth expectations and fiscal prudence. He, therefore, pegged the fiscal deficit for the next fiscal at 3.2% of the GDP and reiterated his commitment to achieving 3% in the next year.

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Abolition of FIPB

The decision to abolish the FIPB is a good step and shows India’s openness to FDI at a time when protectionism is increasing around the world. The government had earlier taken several initiatives to attract more foreign capital into the country, including easing FDI caps across several sectors. These measures are already showing results, as FDI inflows grew 36% year-on-year in the first half of the current fiscal, despite a 5% reduction in global FDI inflows. This is a positive sign as reduced uncertainty about foreign capital outflows can help control currency volatility.

Cleaning up political funding

The FM’s initiatives to clean up political funding, including the innovative step of introducing electoral bonds is welcome. I think it will pave the way for transparency in political funding.

Boosting rural economy

Equally laudable is the move by the government to tackle distress in the rural economy by giving a push to market reforms in agriculture, increased funding for crop insurance and setting a higher target for agricultural credit in the Budget. The government has earmarked Rs 10 lakh crore towards farm credit in the next fiscal. To help farmers get better value for their produce, the Budget talked about a model law on contract farming and reiterated the government’s earlier goal of bringing in more regulated agriculture markets on the electronic National Agriculture Market (e-NAM) platform. Overall, funding for the rural and agriculture sector has been increased by 24%.

It was quite heartening to see the intent on setting up of digital infrastructure using high-speed broad-band optic fibre network to provide internet access to rural India. More than 150,000 gram panchayats will be equipped with broad band connectivity by the end of the next fiscal.

Digital economy

The Budget should also be appreciated for its focus on introducing measures that will push greater adoption of electronic payments and will enable India’s move towards being a large digital economy which is less cash dependent. The capping of cash transactions up to a maximum of Rs 3 lakh is a big bold step that will compel people to move to digital payments.

‘Aadhar Pay’, a merchant version of Aadhar-enabled payment system, is proposed to be launched shortly. Also, certain exemptions related to excise and customs for devices and equipment required for digitisation will aid this transition.

Kiran Mazumdar- Shaw
CMD, Biocon

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