By Dr. Rudra Sensarma, Professor of Economics, IIM Kozhikode
The Finance Minister deserves as much credit for the proposals present in the Union budget 2017-18 as for the ones it does not contain. There were widespread concerns that the budget, in order to shore up revenues, would raise service tax, securities transaction tax and long term capital gains tax. To his credit the FM left indire
ct taxes untouched. The FM has allayed apprehensions of fiscal profligacy in the aftermath of demonetisation by refusing to deviate from the path of fiscal consolidation. The fiscal deficit target is 3.2% next year compared to 3.5% this year although the ultimate target of 3% has been delayed by one more year. Rating agencies will be more understanding of this given the larger context of sluggish domestic and global growth.
The budget focuses on reviving the agriculture sector which is critical as it employs half of the nation’s workforce but contributes very little to national output. The proposed contracting farming law should help to reduce uncertainties in rural incomes and improve the use of technology and farming practices. The boost to this sector is aided by the proposals for micro-irrigation fund, dairy processing fund, rural electrification and general increase in allocation to rural and allied sectors by 24% YOY. Overall public spending on infrastructure is set to go up by 79% YOY. The special package for leather and footwear sectors will boost exports and job growth especially for women workers as shown in the Economic Survey.
The budget has some exciting proposals for the higher education sector. Hopefully the reforms of UGC will see it pass on some of its multiple responsibilities to the Higher Education Financing Agency and focus on regulation. Similarly the proposed national testing agency will free up educational institutions from the job of conducting admission tests and students will be relieved that they have to now write fewer exams for admissions. The proposal to allow reputed hospitals to start courses should provide a boost to medical education and fill the resource gap in health sector.
Overall the budget is a fine balancing act in the context of demonetisation and global uncertainties as it has enough proposals to ensure steady and equitable growth.
