Budget has several holes in it

The Union Budget 2017-18 can be termed as a mixed bag. Although, it is very high on hope, it seems pretty low on performance. A careful reading shows that several crucial issues have not been discussed in detail. The effects of demonetisation are brushed aside on the pretext that the effects will not spill over to the next fiscal.

This is quite unlikely. We could notice its impact on the growth rate sliding down from 7.6 to 7.1 and 6.5 percent. Still, the Finance Minister remains hopeful, though the world economic scenario has improved. As per IMF estimates, world GDP will grow from 3.1 to 3.4 percent this year.

In case of advanced economies it may increase from 1.6% to 1.9% and for the emerging economies from 4.1% to 4.5%. India, being an emerging economy could register 6.5-7.5 range, according to Aravind Subramanian, who prepared the Economic Survey. It is hoped that demonetisation would create a ‘New Normal’ wherein the GDP would be bigger, cleaner, and real.

The second significant issue that was not elaborated upon pertains to the implementation of GST. Even in the words of Finance Minister, there is a long way to go and the deliberations are still live. There is a need to strike a consensus among the States on the GST Rates and slabs and the assurance on compensation. Though it was expected that the GST would become operational by April 1, it is very unlikely that this would get on to the rails before the end of this year.

The third issue on which, further attention should have been paid relates to the ‘digitisation of monetary transactions’. ‘Digital India’ is the dream of the present government. But in terms of awareness, equipment, consent, there is a long way to travel. In spite of the wide publicity, the happenings at the ground level are not quite encouraging.

Traders are finding lame excuses to reject ‘swiping’ for fear of extra charges. There is further clarity expected on this account. The Committee on Digital Payments recommended involving amendments to the existing legislations like ‘Payments and Settlement systems Act, 2007’. Measures need to be taken to ease the supply of machines in this respect. However, the move to do away with excise duty on these gadgets is welcome.

The fourth is the assurance pertaining to the doubling of income of farmers in a span of five years from 2017 to 2022. This was the promise made in the last budget. The same is intended to be continued henceforth. It is also declared that it is high on their agenda.

The happy thing about agriculture is that the sector is progressing for the past couple of years, and more particularly the current kharif and rabi seasons; thus projected to record a growth rate of 4.1 per cent. IT will be pursued through liberal credit flow, strengthening of the cooperative structure, insurance to crop failures and soil health cards.

The schemes are really impressive. But the performance account is poor. While credit flow of Rs.10 lakh crore is imagined, there is little amount that is actually flowing. Farmers getting into ‘debt trap’ has been exposed by many a study. The only solace is the interest waiver for 60 days. It is widely known that the cooperative structure in India is weak, except the success story of Anand dairy. Still worse is the picture in respect of Primary Agricultural Credit Societies (PACS). Integration of these institutions with banking system remains perennial challenge.

Fifthly, there is a claim about prudent fiscal management. Those that are concerned about the fiscal discipline are aware of the fact that the discipline, as enshrined in the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 remained elusive. Every time the targets are being pushed further. Around the last budget, the fiscal deficit stood at 3.9 percent of GDP.

The Finance Minister then wished that it would be brought down to 3.5 percent. Now in the present Budget, the target is that it will be pegged at 3.2 percent. The intention at the time of FRBM was that these targets would be achieved over a period of five years. Now, it is fourteen years. In respect of revenue deficit also, it was hoped that it would be eliminated completely by 2008. The present target is that it would be contained at 1.9 per cent, below the mandated percentage of 2.0 of FRBM. (The writer is former Vice-Chancellor of Acharya Nagarjuna University, Guntur)

By Prof K Viyyanna Rao