Wednesday’s Union Budget was ‘normal for an abnormal year’, India’s first chief statistician Pronab Sen said in an interview to Hindustan Times. The abnormality of the year, he said, was due to political actions such as demonetisation and the introduction of GST as well as the fears over US President Donald Trump’s unpredictability.
He went on to say that the target of 7.5% economic growth presented in the budget for the coming fiscal year was “highly optimistic” since investment scenario in the country is bad and the impact of demonetisation will continue.
“I was expecting more in the budget to deal with these abnormalities but government has been silent on it,” he said.
Demonetisation and the economy
Sen said that he found the Budget lacking on a few important fronts. It did not, for one, do enough to push India’s demonetisation-struck economy back on its feet after it suffered from a ‘cash liquidity crunch’. The ban on high-valuation notes of Rs 500 and Rs 1,000 left most industrial sectors in the country in a lurch. Giving an example of the damage, he said that the ban had hurt even the IT sector that accounts for 45% of India’s Gross Domestic Product (GDP) and nearly 80% of the employment both in terms of growth and equity.
Saying that it would take ‘some time’ for the effects of demonetisation to blow over, Sen said that it would definitely have an impact on the economic growth in 2017-18. “I think 7.5% growth target for next year is optimistic, I will be happy if its hits 7%. In the current year, the growth would not be more than 6%, an impact of 1.5 percentage points because of demonetization,” he said.
Sen rued that there weren’t many signs of corporate investment improving, given the global fears over US protectionism and economic slowdown. He, however, applauded finance minister Arun Jaitley for reinstilling hope in non-corporate investment by way of the re-finance option through Mudra Bank, and providing tax rebates for small and medium enterprises.
“Mudra Bank did well in 2015-16 but then fell off the radar. It has the potential to restore investment in non-corporate sector. I’m glad that thrust has been given to it,” he said.
Speaking about the government’s emphasis on rural agriculture, Sen said that this could in theory improve the lives of villagers but wouldn’t necessarily translate into increased incomes for farmers.
“If their income has to double in the next five years agriculture need to grow at 9% or more,” he said. This financial year, even with a bumper crop, the growth is estimated at 4.1%.
Another factor working against farmers, according to him, is the lack of loan availabilty to everyone who needs one. Stressed on more inclusiveness for farmers in the formal banking system, he said, “The net of formal loans is not widening fast enough to bring people from non-formal sectors who are in debt.”