In a first of many sorts – first Budget in early Feb, first budget combined with the Railways and first budget after demonetisation – the FM delivered a budget that carried on the work and recurring themes of the Government. As they say, good things come in small packages and there were many areas promoting this concept.
Keeping the notion of small government alive, the fiscal deficit for FY18 was pegged at 3.2% of GDP while announcing that it would be brought down to 3% of GDP for the next 3 years. A smaller Government with smaller revenue deficits, smaller fiscal deficits and smaller market borrowing than expected was cheered by the bond market. There was some debate on whether a counter cyclical fiscal push was called for but the Government has stuck to the path of fiscal prudence.
The continued focus on the small farmer was evident with the objective of doubling farmers incomes in 5 years. There was a continued focus on rural India with a 24% increase in outlays on various schemes. There was continued focus on the marginalised members of society with a significant increase in outlay on schemes for this section. A big focus of this Budget was on smaller dwellings or affordable housing, with this industry getting the status of infrastructure and all the subsequent benefits. The small and medium enterprise was benefitted with lower corporate tax rates. The small tax payer found relief with income tax rates being brought down on incomes upto Rs 5 lakhs. The rich will bear part of the financing of this but the rest will probably come from widening the tax net based on the information the Government has garnered through the information on deposits in the banking system post demonetisation.
Keeping in mind the objective to TEC India (Transform, Energize and Clean India) the Finance minister touched on 10 key points and while there was no major push to grow the economy through large spending increases or large tax cuts, there was increased focus on capex and continuing the redistributive agenda.
The total allocation for the rural, agriculture and allied sectors is an impressive ~Rs. 1.87 lakh crore, about 24% higher than the BE of FY17. At the same time, the capex growth stands at 10.1% YoY (on the RE of FY17 numbers).There was reasonable focus on generating jobs and inculcating skills in today’s youth. Keeping that in mind, labor intensive sectors such as leather and footwear are expected to see packages similar to that offered to the textile sector to generate more jobs.
Health and education, the 2 sectors key to developing social infrastructure in the country received due attention as 2 new AIIMS were announced and a new scheme called SANKALP for skilling the youth was also announced.With demonetization making Indians more attuned to non-cash modes of transacting, there was a new found focus on cyber security and digital economy. In fact technology and digital made repeated appearances in the speech.
Overall, this budget is high on realism and intends to deliver what is needed by the economy right now. No big bang reform in the Budget ( though GST remains a much awaited event this coming fiscal) but many small and sure steps in continuation of the agenda set out by this Government when it started. Many small and sure steps are sometimes a better way to achieve desired outcomes in a country like ours. And for that the FM deserves a big thumbs up!