Finance minister Arun Jaitley’s has pressed all the right buttons while presenting Annual Budget for financial year 2016-17. There are few misses too. The salient features of the budget are –
- Finance Minister’s best act is to stick to the target of fiscal deficit of 3.5 percent of GDP. By reducing fiscal deficit from almost 4.8% of GDP in 2014 to 3.5% GDP 2016 -17, he has demonstrated commitment to fiscal prudence. India looks far stronger economy in the world right now. Because of this the government outgo on interest payment has come down. Fiscal prudence has also eased pressure of inflation and in turn high interest rate and high cost of capital for businesses. It is almost certain given the lower fiscal deficit and low inflation, Reserve Bank of India (RBI) is going to lower interest rate in near future, fuelling the demand and economic growth. Higher fiscal deficit leads to crowding out private investment which is so required at this point in time .Fiscal prudence is the base for future economic expansion and development. This is also best insurance against slowing global economic growth.
- The Government’s second important gamble is to give more money to agricultural development. The government has taken comprehensive view on this. There are initiatives and allocations to irrigation, organic farming, effective crop insurance scheme, FDI in food processing, creating a single market for agri produce and focus on the production fruits vegetables, dairy, fisheries, and poultry products, They all generate additional income for farm families. . . This is the right step but agriculture requires more action on sustained basis. Raising MSP ( Minimum support prices) of most of the agri- products particularly Dal and making investment in the warehousing and supply chain will help ease the problems of lack of incentives for farmers to go beyond production of cereals How acute is this problem, one must read The Economic survey on this.. Indian farmers need to move beyond the production of paddy and wheat while demand for proteins is through Dal, dairy and poultry products going up . The diversified portfolio of agricultural production will lead to higher income of farmers. Though there are questions on Government claims on doubling of income of farmers by 2022. The government has not given any roadmap of 15 percent annual growth in farmer’s income in every year for next five years. But focus on irrigation by raising allocation to 20000 crores , if implemented, will lead to all round development of agriculture . This could possibly a game changer for farmers..
- The third right button which Mr.Jaitley has pressed is investment in infrastructure. All along roughly One lac crore is going to be put in road construction for next year. The increased road construction activity is the highlights of Modi government along with increased outlay of pradhan Mantri Gram Sadak Yojna which will have positive impact on rural infrastructure. The whopping roughly one lac crore for development of Railways and other infrastructural projects will have cascading effect. The challenge is in execution .With the investment in power generation and rural electrification, the thrust on infrastructure development is complete. This is where the budget is bang on right. If India’s infrastructure is taken care of , the economic growth rate will accelerate. With increased allocation to Panchayats and Municipalities will mostly go into more investment in improving local hard and soft infrastructure need, plugging the last mile of requirement of development
- Initiatives like giving LPG connections to 5 crore poor family households , automation of PDS outlets using Aadhar cards, a nationwide deployment of micro atms in post offices and a digital depository for degree certificates will also lead to improvement, efficiency and transparency in economy. The budget is forward looking in that sense
But there are areas which finance minister could have done more . The finance minister could have given more policy clarification on disinvestment about loss making PSUs like Air India to give more allocation to social sectors in education and health , research and innovation and also more money to stat .
The efforts in recapitalization of banks could have been more in the budget.. Public sector banks need money, autonomy, technology to survive and to remain relevant.
He could have spend more on mid day meal and give more money to create model secondary schools on the line of Kendriya Vidalayas. He should have given money roughly to 350 state level universities and struggling private universities for improving quality of research and teaching. More sops could have been given to promote research and innovation in companies.
The allocation of health and modernization of district hospitals in all 700 district hospitals of India could have been done with more allocation. These hospitals can be in a limited way be the hub for the block level hospitals
The glaring avoidance not tackling the issue of subsidies to non poor which has been mentioned in the economic survey is too cautious approach. A few more bold steps could have given this budget shine. Mr. Jaitley wants to sail steadily against adverse global headwinds of slowing down economic growth. Probably not rocking the boat too much is the only sensible proposition for India right now. In that sense the budget is a fine balancing act between good politics and economics.