Belying Expectations

Notwithstanding some relief to the middle class, small and medium industries and higher allocations for agriculture, infrastructure etc., the Union Budget 2017-18 falls short of great expectations raised post-demonetisation.

The authors of currency swap created a feeling among people that lakhs of crores of black money will come into the monetary system, providing government with massive funds to trigger higher growth.

The monetary contraction induced by the unprecedented cash crunch created conditions of artificial recession as acknowledged by the official Economic Survey itself as short-term costs.

Post-demonetisation & part remonetisation, budget has to stimulate growth as enunciated by the Finance Minister himself in his budget speech. But, the incremental budget does not grab this historic opportunity.

The total size of the budget has come down from 13.4 per cent of GDP last year to 12.7 per cent of GDP this year. The Finance Minister should have attempted for a more expansionary budget as he enjoys the luxury of higher public food stocks, lower inflation, lower current account deficit etc. But, he seems to have limited the expenditure as he aims at reining in fiscal deficit.

While the fiscal deficit for the financial year 2016-17 was pegged at 3.2 per cent of GDP, in the same year, the tax forgone was a massive 3.18 lakh crore which accounts for 2.1 per cent of GDP. The Finance Minister acknowledged the gloomy situation in private investment.

The budget should have given massive push to public investment to trigger growth dampened due to contraction in consumption which was the result of demoentisation.

Finance Minister stated that India is largely a tax non-compliant society. But, there seems to be no major effort to unveil a radically new tax regime. There are no serious efforts to recover the huge accumulated direct tax arrears to the tune of Rs 6.59 lakh crore.

The budget claims to be aiming at energising various sections of society. But, the most margianlised have not got their due share. Of the total Rs 21 lakh crore budget, the allotment for scheduled castes welfare is only Rs 52,000 crore accounting for a mere 2.5 per cent of the total budget.

Though there is an increase in allocation, it is much below the mandated allocation of 16 per cent of total expenditure commensurate to their share in population. Similarly, the allocation for tribal welfare stood at only 1.2 per cent of the total outlay.

Railways got only Rs 10,000 crore more making it difficult to ensure massive track renewal, expansion of rail network and greater safety etc.

Despite India’s deplorable human development indices, the allocations for ICDS, mid-day meal scheme, ASHA etc., received only marginal increases in allocations.

Finance Minister has given relief in tax liability to the banking sector plagued by bad debts. But, what is more important is to recover so-called non-performing assets (NPAs) which need not always constitute genuine business failures.

The Finance Minister rightly emphasised that the agenda of the budget is to save the country from the evils of corruption and black money. But, he has not given any account of how much black money could be recovered due to demonetisation.