Right direction but less than expected
Common man struggling with the problems arising post demonetisation, had been expecting hugely from the Budget 2017-18. From that angle, budget seems to have been underachiever. Income tax exemption limit remained same, though rate was halved and those with five lakh income got a relief of rupees 12,500. For more relief perhaps they need to wait till next year. In the name of MSMEs, some relief is given to those companies with a turnover of rupees 50 crore or less and they will now pay 25 per cent less tax.
It was being expected that after demonetisation government will be able to get more tax from those who deposit their black money in the banks; and riding on higher tax collections thereon, government would be spending more on education, health and other social services. However, Budget 2017-18, seems to have disappointed people. Though size of the budget 2017-18 is bigger by rupees 1.5 lakh crores, compared to Budget 2016-17, at 21.47 lakh crores, however social services failed to get expected hike in allocation.
Economy in a ‘Bright Spot’
Whether it is fiscal deficit or deficit in the balance of payment on current account (CAD), economy is in much better situation, than it was a few years ago. Last year Finance Minister budgeted for fiscal deficit of 3.5 per cent of GDP, which has not only been achieved, for next year 2017-18, a lower target of 3.2 per cent has also been set. If we leave aside the short term pains of demonetisation, economy seems to be on the track of fast growth, and India continues to be the fastest growing large economy of the world. Deficit in balance of payment on current account (CAD) which was one per cent of GDP in 2015-16, had come down to only 0.3 per cent of GDP in first half of 2016-17. Our foreign exchange reserves have reached to a level, sufficient for import bill of 12 months. Finance Minister claims that inflation is largely under control. On the front of growth, inflation, foreign exchange reserves, fiscal management; in all aspects, economy is in better position, what FM terms as ‘Bright-Spot’.
Insufficient Attention to Public Health
It is said in the budget that requisite changes would be made in the law to bring down prices of essential drugs and health equipments. Production of generic drugs would be encouraged. Budget talks about opening new AIIMSs also. However, these provisions are not sufficient. People lose their saving and whatever assets they have, for treatment of their nears and dears. According to studies in this regard, nearly 10 per cent people go below poverty line every year, due to this reason only. Therefore it was expected from budget to provide for something big towards public heath, which is lacking in Budget 2017-18.
More is the Emphasis on Digitisation
Budget’s emphasis seems to be on the objective of achieving less cash economy through incentives and infrastructure building for the same. Incentives and cash back on transactions using ‘Bhim App’, making IRCTC railway booking free of cost, taking Optical Fibre Network to 1.5 lakh Gram Panchayats etc. are some of the efforts made in this budget. These efforts are targeted towards digitisation, aimed at bringing in efficiencies in transactions. However, how much safe these transactions would be, confusion continues to prevail in this regard. Another argument, perhaps rightly so, is that with more digitised transactions, credit worthiness of traders and businessmen would improve and it will help them raise more resources for their growth. With the help of digitisation, government subsidies and other transfers could also reach to right people without any leakage.
Attention on Agriculture, Infrastructure and Defence
Finance Minister’s major attention and rightly so, has been on rural roads, MNREGA, irrigation, agriculture and allied activities for which he allocates significant amount of funds (to the tune of rupees 1.87 lakh crores). This way his attempt is to make our rural economy stronger. Linking MNREGA to development with a target of building 5 lakh new ponds, is yet another appreciable step. Better allocations for rural roads, prime minister housing scheme and rural electrification and similar other programmes, again is a step in right direction. Budget allocation for drinking water in arsenic and fluoride affected areas has perhaps been made for the first time.
By providing rupees 4 lakh crores for infrastructure, government has given a boost to infrastructure like rail, road, air transport and power sector. However, we need to keep the same going if the nation is to move on the fast track of development and bring itself to the level of developed countries. Better allocation for defence, shows the commitment of the government for country’s national security.
Undue Attraction for Foreign Investment
To somehow show that the government is trying to lift all hurdles for foreign investment and also that it is committed to bring ‘ease of doing budiness’, Finance Minister has proposed to close down Foreign Investment Promotion Board (FIPB). This shows desperation of the government to get FDI at any cost. This is a cause of concern. It is notable that many a times there are dangers linked to FDI. If FIPB closes down, then restrains on ‘bad FDI’ would go and we may be subject to several threats to our economy and even national security. Government should reconsider this proposal.
Today when US and European nations, which themselves had been the proponents of globalisation are turning their back to globalisation and promoting protectionism; US’s new president Donald Trump is giving a new doctrine of Buy American – Hire Americans; Britain has severe its ties with European Union by ‘Brexit’, it seems extremely surprising that why our policy makers are still pleading for foreign capital, free trade and globalisation and are willing to go any length for foreign investment. We need to mend this mindset.
(The writer is Associate Professor, PGDAV College, University of Delhi.)
by Ashwani Mahajan