Budget 2017-18 will strengthen India's economic muscle
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