No Goal­posts Changed, But Seek­ing the Same Goals

Bud­getary fo­cus on the bot­tom of the pyra­mid aligns with Jan Dhan, fi­nan­cial in­clu­sion and broad­band

The Economic Times - - Front Page -

This year’s Bud­geth­as­main­taineda­log­i­cal­con­ti­nu­ity from the pre­vi­ous year’s and also with on­go­ing an­nounce­ments. Hence, the fo­cus on agri­cul­ture has con­tin­ued with em­pha­sis on agri-lend­ing,agri­cul­turein­sur­ance­andim­ple­men­ta­tion of core bank­ing so­lu­tions in Pri­mary Agri­cul­ture Credit So­ci­eties (PACS) with an aim to dou­ble the farm in­come.

Most of the an­nounce­ments were unan­tic­i­pated.The­mea­sure­to­tack­le­black­money—suchas cap­pingth­e­cash­tran­si­tion­limitto ₹ 3lakh—and re­forms in po­lit­i­cal fund­ing — such as re­duc­tion in min­i­mum cash do­na­tion to po­lit­i­cal par­ties to ₹ 2,000and­nov­el­ideasli­ke­elec­toral­bonds—were in the sur­prise list. These mea­sures are none­the­less a con­tin­u­a­tion of de­mon­eti­sa­tion.

The cap­ping of cash trans­ac­tions will help the banks re­duce cash in­ten­sity. This, in turn, will help in free­ing up man­power at branches for un­der­tak­ing more value-added ser­vices.

For the bank­ing sec­tor, the thrust to dig­i­tal econ­omy will help banks ex­pand their dig­i­tal foot­print as well as to meet the ad­di­tional 10 lakh new point-of­sale ter­mi­nals tar­get by March 2017. The agri­cul­ture lend­ing tar­get has been sub­stan­tially re­vised to ₹ 10 lakh crore sup­ported by further pro­vi­sions for agri­cul­ture in­sur­ance.

Itisim­por­tant­tocre­ate­cred­itab­sorp­tion­ca­pac­ity rather than to just en­hance lend­ing tar­gets. This can done by sup­port­ing in­fra­struc­ture cre­ation in ru­ral ar­eas, which the Bud­get aims at do­ing. The draft Bill to cur­tail the me­nace of il­licit de­posit schemes is also a wel­come move af­ter the suc­ces­sof theJanDhanYo­jana.Af­ford­able­hous­ing will be clas­si­fied as in­fra­struc­ture, which is ex­pected to give this sec­tor a boost.

The Bud­get has pro­posed to cre­ate a Pay­ments Reg­u­la­tory Board in the Re­serve Bank of In­dia by re­plac­ing the ex­ist­ing Board for Reg­u­la­tion and Su­per­vi­sion of Pay­ment and Set­tle­ment Sys­tems. This is wel­come, given that pay­ments func­tion and bank­ing func­tion in new dig­i­tal en­vi­ron­ment have been com­pletely un­bun­dled.

The Bud­get has pro­vided ₹ 10,000 crore for re­cap­i­tal­i­sa­tion of banks in 2017-18. But what is re­as­sur­ing is the FM’s state­ment that more will be given if re­quired. The abol­ish­ing of the For­eign In­vest­ment Pro­mo­tion Board is a wel­come move as it re­moves an­other hur­dle in move­ment of in­ward FDI. This will boost the for­eign in­vestors’ con­fi­dence to in­vest in In­dia.

The Bud­get has chalked a clear fis­cal path for theyearsa­headand­with­the­p­ro­posed­chan­gesin per­sonal in­come tax at the low­est slab, the tar­get of 3.2% of the GDP may be achieved if new re­forms like GST kick in within the stip­u­lated date.

There has been a thrust on qual­ity of ex­pen­di­turea­si­sev­i­dent­from­geo-tag­gin­gof MGNREGA as­sets and us­ing space tech­nol­ogy to plan its works, in line with GoI’s em­pha­sis of ex­tract­ing max­i­mum value from gov­ern­ment ex­pen­di­ture.

With the merger of the rail­way bud­get with the Union Bud­get, the In­dian Rail­ways has be­come cen­tral to the gov­ern­ment’s pol­icy on in­fra­struc­ture in­vest­ment, kick­ing off an in­vest­ment cy­cle and gen­er­at­ing sec­ond-or­der em­ploy­ment.

This vi­a­bil­ity of the Rail­ways has been kept in mind as it has been stated that fares will be de­ter­mined on the ser­vice pro­vided as well as the cost of com­pet­ing modes of trans­port. Ac­cord­ingly, ru­ral road, air con­nec­tiv­ity to Tier-2 towns and ship­ping have also been touched on in this Bud­get. We hope that high-speed broad­band con­nec­tiv­ity on op­ti­cal fi­bre will be avail­able in more than 1,50,000 gram pan­chay­ats by 2018. With­out this, the dig­i­tal econ­omy won’t flour­ish.

Over­all, the Bud­get has not changed the goal­post set in the pre­vi­ous one. It has added new tar­gets. But on care­ful ex­am­i­na­tion, they all ap­pear to be pru­dent and rea­son­able. Given the macroe­co­nomic en­vi­ron­ment, at home and abroad, the Bud­get has achieved a del­i­cate bal­anc­ing act.

Re­cap­i­tal­i­sa­tion of banks will boost their lend­ing ca­pac­ity as well as their abil­ity to raise new cap­i­tal

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