BUDGET-2017- BALANCING AGAINST THE FORCE OF IMBALANCES

This was perhaps most challenging environment under which Mr. Jaitley had to draft
this budget. The force of imbalancs coming from both inside and outside the nation.
The growing oil and commodity prices, has lessened the ease of garnering extra
resources by imposing additional duties. Bank credit growth at 5.1 percent is at its
lowest in the last twenty years, new job creation growth rate is sitting on the ground
and on top of it the shock of demonetization. Internationally, the growing
protectionist approach of developed nations and challenge of maintaining and
retaining foreign flow of investment in wake of hawkish Fed instance, make the
situation quite complex for any finance minister.

Since the revenue and resources are limited, so in order to keep this budget realistic
and pragmatic, finance minister was faced with the daunting task of sketching the
frame work of fiscal policies which is capable enough in reviving the investment
cycle and pushing the growth of overall economy within the limited dose of
expenditure.

Controlling expenditure within limit warranted avoiding freebies. And this was
necessary to maintain fiscal prudence though a minor slippage, at 3.2 percent of
fiscal deficit is commendable. It ensures maintaining and improving the credit rating
to ensure continued inflow of foreign funds.

Total expenditure outlay has been increased just by 6.6%, which means gross
expenditure will be within 12.7 percent of GDP, which is the least expenditure to
GDP ratio after 1970. Though the size of expenditure might have contained but the
quality has not been compromised. Focus is on capital expenditure. It is 14.4
percent of GDP which is decade high. Capital expenditure has been increased by 11
percent (revised estimate) compared to previous budget.

Allocation to rural and agriculture sector has been increased by massive 42 percent.
Crop insurance coverage has been almost doubled, rural employment program has
been given outlay of Rs. 10000 crore. Transportation sectors out lay has been
increased to 2.4 lakh crore. The nature of such expenditure is that their result will
be visible in short term.

The cash intensive SMEs sector, which was hit the hardest in note ban
experimentation, contributes the most in manufacturing, employment generation,
export and consumption and consequentially contributes the most in GDP. By
reducing corporate tax rate aimed at this sector and massive increase in rural
expenditure government seems to be concerned about this segment.

Ease of doing business in India by doing away the FIPB and dissuading itself from
doing any controversial tax provisioning that might anoid foreign investors are some
of the additional goodies of the budget.
At the same time receipt side too has been contained at practical level. Estimating
overall growth of only 17 percent, which is quite a normal assumption, considering
the previous years growth track. It translates that government is not considering
any windfall gain in tax revenue due to demonetization. Though it might be
shocking, at the same time it makes this budget realistic.

Giving some relief in tax rate and slab to middle class, it seems trying to revive
consumption demand also. Focus on digitization and fixing the ceiling of cash
expenditure, there by transforming in cash less economy is an attempt towards
bringing transparency to economy. This should be vital in correcting th tax GDP
ratio.

This budget is also an attempt in bringing in the structural reform in Indian

economy. The silver lining is there in shrinking gap between indirect and direct
revenue collection. Growth in agricultural productivity and its rising share in GDP is
heartening as this is the sector which is capable of doubling the per capita GDP.

But this budget is alarmingly lacking on some count. The most that pinch is growth
provision in revenue expenditure. This has been estimated to grow by 6 percent
only. Previous experience tell that this certainly goes beyond the budgeted
estimate. Disinvestment assumption too at 72,500 crore seems enthusiastically
estimated. If Government fails on both these counts, it will be left with no option but
to dent its capital expenditure. It has also cut the recapitalization need of PSU banks
to Rs.10000 crore (from 25000 crore) in a year when NPAs are likely to peak, this
seems quite surprising. Undoubtly this figure needs an upward revision. These are
some short comings that may makes this budget beautiful in books only.

But economics is dynamic, it can not be predicted precisely. Many thing may occour
and many can go beyond perception. Beauty is not in prediction beauty is planning
with perfection. This budget has planned well.