TEC India (Budget 2017) – Part 2

Written by: Ronak Pol
Published: 2nd February 2017

To read the 1st part, click here

Infrastructure

For me, planned infrastructure investment has been the biggest component of the 2017-18 budget. As seen before most of the investment even under other heads has essentially been investments to better the infrastructure. Merging railways budget with the union budget was an important design decision which lets the government to better integrate the entire government expenditure. The railway budget was not revolutionary but came with incremental changes to improve railway safety, cleanliness and better rail competitiveness.

In terms of other projects, there have been incremental changes to improve road connectivity and better infrastructure at tier 2 airports.The amount allocated for transportation is over 10% of the entire budgetary allocation and stands at 2,41,387 crores. Steps have also been taken to further the digital India initiative and to improve Indias ability to tackle oil price fluctuations.

The total allocation for infrastructure development in 2017-18 stands at 3,96,135 crores.

Finance Sector

Gradual disinvestment from PSUs has been a drive that the government has taken since the last couple of years. To continue on this, the government has declared to list railway PSEs like IRCTC, IRFC and IRCON. The idea is to help provide leverage for these companies and also reduce the administrative backlog of the government.

Another major allocation was to the Pradhan Mantri Mudra Yojana which has the focus on providing funding to the non-corporate small business sector. This year the proposed lending budget was doubled to 2.44 lakh crores with priority will be given to Dalits, Tribals, Backward Classes, Minorities and Women. Such a measure has the potential to kick-start entrepreneurship initiatives at the ground level and to improve grass root unemployment. Although the lack financial literacy is a major concern when it comes to such initiatives questioning the ability of the scheme to fund its rightful purpose.

Digital economy and Public service

Digitising India has been a flagship initiative of the Modi government where the government has disrupted the present order to arguably bring marginal gains in the rate of digitisation. Although a lot was not explicitly stated in the present budget, but steps will be taken to strengthen the current initiative and increase rural penetration to build a more uniformly digitised India.

The emphasis was also on improving the efficiency of public services by using digital platforms to disburse funds and ease transactions on the whole. A much-needed legislative reform came through the proposed law to confiscate assets of individuals who have fled the country to escape legal action against them.

Overview and Conclusion

The total budgetary expenditure for the year 2017-2018 stands at 21.47 lakh crores with capital expenditure going up by 25.4% with defence expenditure excluding pensions of ` 2,74,114 crores including ` 86,488 crores for Defence capital.

The most interesting part of this year’s budget is its fiscal deficit target of 3.2% of GDP for the present year and 3% for the next year. With no significant taxation increase or adoption of any long-term projects to increase government revenue, it is ambitious on the government’s part to target such deficit figures. This leads me to question the sustainability of such a deficit target while acknowledging the fact that government schemes like IDS and demonetization have provided the government with a sense of relief in terms of liquidity and funds for the present year.

The last paragraph of the Finance minister also provided some insights into this, it read “It will be our endeavour to improve upon these fiscal numbers,…., through greater focus on the quality of expenditure and higher tax realisation from the huge cash deposits in Banks, triggered by demonetisation.” Meaning that government expects demonetisation to reduce the informal economy in India and to widen the tax net of the country to help fund future budgets and by doing so acknowledges that in its present form such a budget is not sustainable.

(PS: Part B of the Union Budget, consisting of Tax proposals has not been covered in this article as I feel there is sufficient literature to cover these aspects and I need not address all or any of those points in this article)

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