Bud­get 2017-18 will strengthen In­dia's eco­nomic mus­cle

FICCI Business Digest - - Special Feature -

Against the back­drop of the de­mon­e­ti­za­tion drive, the Union Bud­get 2017-18 has man­aged to suc­cess­fully main­tain a bal­ance be­tween the ex­pec­ta­tions of in­dus­try and as­pi­ra­tions of a com­mon man. The Fi­nance Min­is­ter's long-term vi­sion en­sures eco­nomic devel­op­ment along­side eco­nomic jus­tice as growth with­out in­clu­sion can be a li­a­bil­ity for any coun­try. Be­ing di­rec­tion­ally cor­rect and fis­cally pru­dent with the in­ten­tion to for­tify the gov­er­nance fab­ric of the na­tion, the for­ward-look­ing bud­get would tremen­dously strengthen the eco­nomic mus­cle of the coun­try.

De­mon­eti­sa­tion was an at­tack on the stock of black money and the big­gest take­away in the Bud­get is the re­form and mea­sures in­tro­duced on elec­toral funding, which will help in at­tack­ing the root cause of cor­rup­tion in In­dia. FICCI had rep­re­sented to the govern­ment for bring­ing in such mea­sures to en­hance trans­parency in line with the tenets of good gov­er­nance and the govern­ment de­serves full marks for this bold and prag­matic mea­sure.

In pur­suance of its ob­jec­tive to dou­ble the in­come of farm­ers in five years' time, the govern­ment has sig­nif­i­cantly en­hanced the al­lo­ca­tions un­der sev­eral agriecon­omy di­rected schemes in­clud­ing those re­lated to farm credit, crop in­sur­ance, soil health, ir­ri­ga­tion, mar­ket in­fra­struc­ture, dairy farm­ing et al. These en­deav­ours com­pris­ing the all­time high an­nual al­lo­ca­tion for the re­formed MNREGA scheme will aid in im­prov­ing the in­come lev­els in ru­ral ar­eas and gen­er­ate a swathe of new jobs across vast parts of the na­tion. This can be deemed as a clear boost for gen­er­at­ing de­mand on a large scale.

It was also heart­en­ing to wit­ness that the bud­get con­tains many mea­sures which em­pha­sise on the need to have a strong ed­u­ca­tion and skill devel­op­ment frame­work in the coun­try to cap­i­talise on the demographic div­i­dend. The moves 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 it with DTH chan­nels and en­hanc­ing the reach of Pradhan Mantri Kaushal Ken­dras, will con­sid­er­ably build on the gains made in the ar­eas of ed­u­ca­tion and vocational train­ing and em­power the coun­try's youth to ob­tain gain­ful jobs.

It is ev­i­dent that with the in­clu­sion of the Rail­way Bud­get in the main Bud­get, the govern­ment was 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 aug­ment the ser­vice qual­ity and bring in greater ef­fi­ciency in the op­er­a­tions of our rail­ways, ports, roads and high­ways. In ad­di­tion, the ex­ten­sion of in­fra­struc­ture sec­tor sta­tus to af­ford­able hous­ing seg­ment will have a mul­ti­plier ef­fect as the hous­ing sec­tor has link­ages to al­most 200 in­dus­tries across the econ­omy.

Fi­nan­cial sec­tor, the back­bone of the econ­omy, re­ceived de­serv­ing at­ten­tion in this bud­get. The abo­li­tion of the For­eign In­vest­ment Pro­mo­tion Board was in the right di­rec­tion as 90 per cent of the FDI in­flows are com­ing through the au­to­matic route. This is again a tes­ta­ment of the ad­min­is­tra­tion's re­solve to have more gov­er­nance and less govern­ment.

Be­sides, 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.

On the banking side, the Fi­nance Min­is­ter al­lo­cated Rs. 10,000 crores for cap­i­tal­is­ing public sec­tor banks but 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, in­dus­try looks 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.

Fol­low­ing de­mon­eti­sa­tion, it is now im­per­a­tive to pro­mote the us­age of dig­i­tal pay­ments within the econ­omy. Con­tin­u­ing with its ef­forts to in­cen­tivise 'go­ing dig­i­tal', the govern­ment made some an­nounce­ments on ex­pected lines such as the set­ting up of a spe­cialised Pay­ments Reg­u­la­tory Board within the Re­serve Bank of In­dia to 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 the stake­hold­ers and will en­gage with the reg­u­la­tor and 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 and 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.

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 which will en­hance con­sump­tion de­mand in the econ­omy that took a hit due to de­mon­eti­sa­tion. 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. The Fi­nance Min­is­ter has gone the Key­ne­sian way to stim­u­late growth in the econ­omy through higher de­mand.

Pankaj Pa­tel, Pres­i­dent, FICCI

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