Bud­get’s TEC Theme will Aid in Eco­nomic Re­vival

The Economic Times - - Front Page -

The ex­pec­ta­tions from fi­nance min­is­ter Arun Jait­ley’s fourth Bud­get were high, par­tic­u­larly on the back of the de­mon­eti­sa­tion drive. The Bud­get has cer­tainly de­liv­ered on these ex­pec­ta­tions and has rekin­dled hopes of a sus­tain­able and in­clu­sive eco­nomic re­cov­ery while ad­her­ing to fis­cal rec­ti­tude.

SUPPLEMENTING THE FIS­CAL HOLY TRINIT Y WITH TEC

Con­tin­u­ing with the pre­vi­ous bud­getary ef­forts of cre­at­ing growth, pre­serv­ing a sus­tain­able sav­ingsin­vest­ment bal­ance, and de­stroy­ing de­mand side in­fla­tion, the FY18 Bud­get ups the ante through its TEC agenda of trans­form, en­er­gise, and clean In­dia. To elab­o­rate:

Trans­form the qual­ity of gover­nance and qual­ity of life

En­er­gise var­i­ous sec­tions of so­ci­ety, es­pe­cially the youth and the vul­ner­a­ble, and en­able them to un­leash their true po­ten­tial

Clean the coun­try from the evils of cor­rup­tion, black money and non-trans­par­ent po­lit­i­cal fund­ing

In ad­di­tion, to build on the ob­jec­tive of digi­ti­sa­tion, the Bud­get has taken sev­eral steps for a less-cash be­havioural nudge. While the ₹ 3 lakh cap on cash trans­ac­tions will set the bound­ary, the re­lax­ation of tax on pre­sump­tive in­come, waiver of ser­vice charge on e-tick­ets, and further tax ex­emp­tions for PoS (point of sale) in­stal­la­tions will help in this be­havioural trans­for­ma­tion. More­over, the Bud­get also an­nounced the cre­ation of a Pay­ments Reg­u­la­tory Board and Aad­haar Pay, a mer­chant ver­sion of Aad­haar-en­abled pay­ment sys­tem.

THE IM­PER­A­TIVE OF JOBSCREATING GROWTH

With the Eco­nomic Sur­vey high­light­ing In­dia’s de­mo­graphic div­i­dend, in­ter­nal mi­gra­tion and in­equal­ity, the Bud­get has rightly fo­cused upon job cre­ation. Some key an­nounce­ments stand out:

The 5% re­lax­ation in cor­po­rate tax for MSMEs and re­defin­ing MSMEs through a turnover cri­te­ria will be a sig­nif­i­cant game changer. This, along with the GST, will help cre­ate em­ploy­ment.

The pro­vi­sion of in­fra­struc­ture sta­tus to af­ford­able hous­ing will cre­ate for­ward and backward link­ages with the rest of the econ­omy. I ex­pect the bank­ing sec­tor’s ap­petite to lend to this sec­tor to get a boost, thereby fa­cil­i­tate eas­ier credit ac­cess.

Abol­ish­ing the FIPB will further sim­plify and im­prove ac­cess to FDI across var­i­ous sec­tors of the econ­omy, in par­tic­u­lar in­fra­struc­ture, man­u­fac­tur­ing and con­sump­tion-driven sec­tors.

Be­sides the above-men­tioned growth en­ablers, the Bud­get has bal­anced the need for re­viv­ing con­sump­tion (through in­come tax re­lax­ation for the aam aadmi, higher al­lo­ca­tion for MGNREGS) and per­sist­ing with the ob­jec­tive of pub­lic capex-led in­vest­ment re­vival via ~11% in­crease in al­lo­ca­tion for cap­i­tal spend­ing.

STICK­ING TO FIS­CAL REC­TI­TUDE

Even as the Bud­get strikes a bal­ance be­tween sup­port­ing con­sump­tion and kick-starting in­vest­ments, it does not lose fo­cus on fis­cal rec­ti­tude, which, in my opin­ion, acts like the cen­tral ner­vous sys­tem for over­all macroe­co­nomic and fi­nan­cial sta­bil­ity. The fi­nance min­is­ter es­chewed from pop­ulism by dis­play­ing pru­dence in cal­i­brat­ing the ex­tent of fis­cal con­sol­i­da­tion at 3.2% of GDP, de­spite the tran­si­tional ad­verse im­pact of de­mon­eti­sa­tion and ini­tial GST mi­gra­tion-re­lated un­cer­tainty. It’s heart­en­ing to know that the Bud­get has al­ready in­cor­po­rated some rec­om­men­da­tions of the FRBM Re­view Com­mit­tee and al­ready ex­ceeded the man­dated tar­get for rev­enue deficit of 2% of GDP on the downside in FY18.

FI­NAL THOUGHTS

Over­all, the Bud­get fo­cuses on 10 crit­i­cal themes of farm­ers, ru­ral pop­u­la­tion, youth, the poor and the un­der­priv­i­leged, in­fra­struc­ture, fi­nan­cial sec­tor, dig­i­tal econ­omy, pub­lic ser­vice, pru­dent fis­cal man­age­ment, and tax ad­min­is­tra­tion. These 10 fo­cus ar­eas will help boost growth, en­hance pro­duc­tiv­ity, further rein in inf la­tion, and in­fuse trans­parency into com­mer­cial ac­tiv­i­ties, delivery of pub­lic ser­vices, and po­lit­i­cal fund­ing.

The com­bi­na­tion of fis­cal dis­ci­pline, TEC agenda, con­sump­tion­in­vest­ment re­vival, and em­pha­sis on trans­parency should cre­ate a vir­tu­ous cy­cle of higher, in­clu­sive and sus­tain­able growth. I rate the Bud­get a re­sound­ing 9 on 10.

The 10 fo­cus ar­eas in the Bud­get will help boost growth, en­hance pro­duc­tiv­ity, rein in in­fla­tion, and in­fuse trans­parency into com­mer­cial ac­tiv­i­ties

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