The Budget 2017-18 has been evolved in economic policy developments. On the domestic side, initiating structural reforms notably, the passage of Bankruptcy and Insolvency Act and the Constitutional amendment paving the way for implementing the GST while demonetization large denomination currency notes signals a regime shift to punitively raise the costs of illicit activities.The Economic Survey conducted by the Government of India states that despite global sluggishness, the domestic economy has sustained a macroeconomic environment of relatively lower inflation, fiscal discipline and a moderate current account deficit coupled with broadly stable rupee- dollar exchange rate. At the same time, there is a need to overcome the three ‘meta challenges’ inefficient redistribution, ambivalence about the private sector and property rights and the improving but still challenged state capacity.
The fiscal deficit for FY2017-18 is targeted at 3.2 per cent of GDP and government remains committed to achieve 3 per cent in the following year. The country’s economic growth is facing challenges such as subdued manufacturing, lower exports of services and lower capital expenditure. The three important structural changes that began last year will continue this year as well. The presentation of the Union Budget on February 1, removal of distinction between ‘plan’ and ‘non-plan’ expenditure and merger of the Railway Budget with it. The focus on fiscal prudence at 3.2% of the GDP and allotment to the infrastructure sector was widely praised, while just before the Budget presentation.
The Union Budget 2018 is likely to witness incentives for rural population and farmers, infrastructure investment push and measures for job creation.”Clearly, in the last year of its term, the government would like to consolidate on major steps taken than opening up of any new front. In the budget construction of markets (akin to APMC) facilitating farmers and consumers to come together to transact, providing a robust e-platform for farmers to sell their produce, internet connectivity in rural areas, modern payment mechanisms.
Incentives for building infrastructure (roads) in rural areas should be increased. This would act as a win-win for farmers as well as the developer or initiator. Further, the government has to announce some direct-to-farmer schemes that enable farmers to take the benefit.Post GST, consumers expected prices of commodities to drop on the hope that the benefits of credit under the GST law would be passed on to them. However, this did not happen in several cases with the result that there was a certain level of dampness in the market. The introduction of a specific regime which not only takes care of the seamless credit mechanism but also removes the compliance/filing hurdles would be welcome.
Anti-profiteering regulations have already been announced, and there could be additional announcements around these regulations in terms of their operationalisation.Software and the Information Technology sector believe that the upcoming budget would be fairly neutral to them. But some of the demands of the sector are tax sops for research and development activities and imposition of import duty on telecom and technology products which are outside the purview of agreements signed by India. This will provide a boost to both the sector and to the Government’s Make in India initiative as well. Power sector, especially the renewables segment is expecting that the FM will have a special emphasis on them.
A bulk of new generation capacity which was added in the year gone by was from non-carbon sources. The economy is leap forward awaits us at the next step which will help us to throw off our constraints and move towards a sustained high growth scenario. Or it could be the start of the long upward trudge of slow improvement in growth with high growth pushed back for another day. An effective budget could be the final touch on an ongoing effort to revive, revitalize and launch the Indian economy into a higher growth trajectory. Budget 2018 is the focus of a lot of hope, anticipation, and anxiety all at the same time.