On the face of it, there’s nothing fundamentally wrong about the FM’s Budget that rests on not one, not two but nine pillars viz agriculture, rural populace, social welfare including healthcare, education, skill development & employment creation, infrastructure, financial reforms, fiscal prudence, tax reforms and ease of doing business.
Several measures, announced in disparate areas, promise positive yield in the medium to long term. Farmers and budding entrepreneurs have handsome takeaways, so does the bottom-end of the salaried class, which are all great news. The rural and farm sector allocations including MGNREGA, irrigation, electrification, crop insurance, interest subvention and cooking gas subsidies are laudable as they would make a difference to countless BPL families across the length and breadth of the country. Commitment to no retrospective taxation and measures pertaining to FDI, voluntary disclosure of black money, national rural digital literacy mission were among the other positives.
The silver lining, however, was that the fiscal deficit target of 3.9% was met and target of 3.5% has been maintained for FY17. This raises expectations of a rate cut from the RBI. The two other big positives are the Rs2 lac crore capital expenditure on roads and railways and continued flow of funds and autonomy from Centre to State (Share of states at 35% v/s 27% in 2014-15).
While many saw the lack of adequate re-capitalization of PSU banks as a negative, the other way of looking at it is, not wanting to throw more good money after bad. The government can always provide support whenever needed; in fact PSU consolidation or strategic sales as mentioned would be smart moves.
For the year ahead, the FM’s tax revenue targets largely look achievable. To meet his target of 3.5% fiscal deficit, Mr. Jaitley’s banking on collecting ~Rs30,000 crore from the amnesty scheme possibly, Rs98,000 crore from communication services and 25% rise in non-tax revenues. With a budgeted growth of 15% for Plan-expenditure and a lower growth of 9% for non-Plan expenditure, here’s hoping for a dream Budget next year.