Union Budget 2017-18 - A Critical Review

“इस मोड़ पर घबरा के न थम जाइए आप, जो बात नयी है उसे अपनाइये आप;

डरते हैं नयी रह पर क्यों चलने से, हम आगे-आगे चलते है आजाईये आप।”

Given the heavy usage of economical terms and verbose construction of sentences, the Union Budget usually elicits unenthusiastic reactions from the common man. But the fact that India stands out as a bright spot in the world economic landscape despite tumultuous international developments and radical domestic policy actions shows that her macroeconomic stability continues to be the foundation of her economic success. The government should be credited for not indulging, this year, in any ill-advised fiscal adventurism or resorting to sheer populism for good ratings.

This year, the government came up with a "Transform, Energise and Clean India" agenda to transform the quality of governance, energise the various sections of society and clean the country from the evils of corruption, black money and non-transparent political funding. The budget also witnessed the historic merger of the Railway Budget with the General Budget to bring the railways to the centre stage of government's fiscal policy without “compromising the functional autonomy” of the Indian Railways. The government also did away with the plan and non-plan classification of expenditure, a remnant of the Planning Commission, to facilitate optimal utilisation of resources. This article discusses the Union Budget and its provisions under the following themes: I. Indian Railways

"For 2017-18, the total capital and development expenditure of Railways has been pegged at Rs. 1,31,000 crores. This includes Rs. 55,000 crores provided by the Government."

Indian Railways is envisaged as a microcosm of the society and the lifeline of our economy. But excessive populism and bureaucratisation over successive years have left railways in a shambolic state.  While the setting up of a railway regulatory authority for organisational consolidation, decentralisation of operations, setting up of biodegradable waste to energy plants and realistic pricing of fares, as proposed in the Budget, is imperative, an equally strong political intervention is required to dismantle vested interests in the monopoly. The introduction of onboard services like quality catering, hospitality services by uniformed personnel, access to WiFi and entertainment, special emphasis on hygiene and cleanliness and provision of bio-toilets have been inundating the Rail Budget for the last couple of years. A “party with a difference”, when in power, was expected to undertake administrative reforms to overhaul the railways structurally. The creation of Rashtriya Rail Sanraksha Kosh, competitive ticket booking facility and elimination of unmanned level crossings are welcome changes to enhance passenger safety and travel experience. The operating ratio target of 94.9 as against 92 for the previous year seems optimistic even in the wake of increasing number of rail accidents. In brief, the doing away with the rail budget is a welcome acknowledgement of growth as a process of change that requires flexibility, adaptability and the willingness to experiment. But how the new institution plans to deal with the burden of legacy and carve out a niche for itself to set the pace and steer transformation is unclear. While the Finance Minister expressed immense satisfaction at saving about Rs. 9,500 crores as dividend on the budgetary support to railways, he remained silent on how to go about financing its pension liabilities which are estimated to be about Rs.45,500 crores in 2016-17. II. Black Money and Electoral Reforms

“Madam Speaker, the thrust of my tax proposals in this Budget is stimulating growth, relief to middle class, affordable housing, curbing black money, promoting digital economy, transparency of political funding and simplification of tax administration.”

The government’s spirit to increase tax buoyancy as well as compliance is manifested in its proposal to develop a robust digital payment infrastructure in the country by leveraging the Jan Dhan-Aadhar-Mobile (JAM) trinity. The ban on cash transactions exceeding Rs. 3 lakhs per se is insufficient to curb the menace of black money. The lowering of capital gains tax on immovable assets and halving the income tax rate for the low income group seems to be an exercise in placating voters in the aftermath of demonetization. By reducing the maximum amount of cash donation that a political party can receive from an anonymous source from Rs. 20,000 to Rs. 2,000, the government seems to have walked the talk on bringing transparency in political funding. The proposed amendment to the Reserve Bank of India Act to enable issuance of electoral bonds purchased from authorised banks against cheque and digital payments only and redeemed only in the designated account of a registered political party, further reiterates its resolve to fight black money. However, in this bureaucratic sleight of hand, it has dodged the real question of investigating the funding sources of political parties. Nor has it laid down any penal provision in this regard. Also, political parties, owing to their partisan nature, should be mandated to disclose information sought under under the Right to Information Act to bring transparency in their otherwise obscure way of functioning. The government seems to have lost yet another opportunity to address this incoherence in electoral politics. III. Rural

“The Government will continue to work closely with the farmers and the people in the rural areas to improve their life and environment. This is a non-negotiable agenda for our Government. The total allocation for the rural, agriculture and allied sectors in 2017-18 is Rs. 1,87,223 crores, which is 24% higher than the previous year.”

Increased allocations under the Fasal Bima Yojana, computerization and integration of Primary Agriculture Credit Societies, expansion of the coverage of National Agriculture Market (e-NAM) with enhanced agricultural credit target are welcome measures in raising the productivity of primary sector. The launch of Mission Antyodaya for poverty alleviation, availability of electricity, clean drinking water and sanitation facilities and stepping up of allocations under the Pradhan Mantri Gram Sadak Yojana and Pradhan Mantri Awas Yojana will go a long way in improving rural infrastructure. The allocation of Rs. 8,000 crores for the NABARD-anchored Dairy Processing and Infrastructure Development Fund is expected to modernise milk processing units. It is surprising, however, that the “living monument of failures” of the UPA government, MGNREGA, regained its glory as the ‘nation’s pride’ and also succeeded in garnering the highest ever budgetary allocation of Rs. 48,000 crores. Perhaps, by appropriating the scheme and laying claim to it by improving it and making it more constructive, the government is trying to salvage its image among the rural population.IV. IV. Infrastructure – Make in India/Digital India

“The total allocation for infrastructure development in 2017-18 stands at Rs. 3,96,135 crores. This magnitude of investment will spur a huge amount of economic activity across the country and create more job opportunities.”

By loosening its purse strings for the infrastructure sector, the government has given a fillip to affordable housing and connectivity, both transport and telecom. Increased allocations for highway construction, airport development and the Sagarmala project are expected to spurge a huge amount of economic activity and create new job opportunities for the masses. It is surprising, however, that the much publicised policy initiatives, namely Make in India and Digital India, found only a passing reference in the Finance Minister’s speech. The National Optical Fiber Network project renamed as BharatNet, it seems, has failed to reflect the national aspiration despite several timeline revisions and budget allocations. The Income Declaration Scheme 2016, that preceded demonetization of 500 and 1000 rupee notes, was succeeded by a “surgical strike” against black money, corruption and counterfeit currency which led to the stripping of high denomination currency notes of their statutory status. The push for digital payments through the introduction of Aadhar Pay for cashless transactions is, therefore, understandable. The proposal to strengthen digital payment infrastructure and grievance handling mechanisms is welcome. The proposed Payments Regulatory Board should aim at bringing parity between physical cash and digital payment transactions, with interoperability and access to a unified payment infrastructure. V. Education & Social Sector

“Quality education will energise our youth. In the words of Swami Vivekananda, “The education which does not help the common mass of people to equip themselves for the struggle for life ………… is it worth the name?”

The launch of SWAYAM platform by leveraging information technology, Skill Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP) programme to provide market relevant training and integration of entrance examinations under a National Testing Agency are important reforms necessary to build an able workforce. Pradhan Mantri Kaushal Kendras stand out as a shining example of harnessing youth talent and empowering them for better job opportunities. The thrust given to Skill Strengthening for Industrial Value Enhancement (STRIVE) will strengthen the apprenticeship programmes through industry cluster approach. On expected lines, most of the education-related announcements this year had little or no financial implication as the Higher Education Finance Agency envisaged in the budget last year is expected to raise up to Rs. 10,000 crores from the market and lend to government-run higher educational institutions. In the spirit of Sabka Saath Sabka Vikas, the government has proposed to set up Mahila Shakti Kendras to provide convergent support services for empowering rural women with opportunities for skill development, employment, digital literacy, health and nutrition. By granting infrastructure status to affordable housing, it has opened the gates for higher investment. Targeting bank lending to the real estate sector, however, is a risky proposition as it poses a systemic risk of emptying the coffers of state-controlled banks through imprudent lending, as has been observed in past years. Conclusion

“When my aim is right, when my goal is in sight, the winds favour me and I fly.”

The International Monetary Fund (IMF) estimates that the emerging economies will increase their growth from 4.1% to 4.5% in 2017-18. Thus, macro-economic policy is expected to be more expansionary which points to an optimistic outlook for the next year. Amidst all these developments, the government has shown wisdom by choosing the path of fiscal consolidation without compromising on the public investment requirements of the economy. Demonetisation of high denomination bank notes and the proposed roll out of the Goods and Services Tax are transformational economic reforms that will have “epoch-making an impact on our economy and the lives of our people”. The government has done the right thing by embracing the historic opportunity at this cusp of change.   Written by: Shreyans Jain, Batch of 2018, Indian Institute of Management Lucknow