Union Budget 2017-18 is a positive step forward for India because it has focused on increasing consumption and enabling infrastructure development.
The finance minister has announced a 25% increase in allocations for infrastructure over the last year. This will surely have a salutary effect on the economy, creating new employment and income generation opportunities. One also believes that surplus liquidity in the banking system, spawned by demonetisation, will push banks to lower their lending rates and in turn increase the access to credit. This may have a multiplier effect on economic activity, increase consumer spending and create additional demand. Industry is also likely to see productivity gains.
A welcome move is that the budget has focused on improvement in the quality of life of a large section of the population. Affordable housing has been given a big thrust by giving it infrastructure status. The government has increased its allocation for housing. It has targeted the completion of 10 million houses by 2019. Furthermore, the National Housing Bank has been given the mandate to refinance individual housing loans.
The finance minister announced a number of schemes for farmers that will enable income security for the farming community. The success of MNREGA, India’s rural employment scheme, has led to the scheme getting a higher allocation in this budget. Women and youth have been singled out as beneficiaries of skill development programmes. Through a slew of measures, the finance minister wishes to uplift over 10 million households above the poverty line by 2019.
When it comes to infrastructure, transportation has been a focus area, with the budget looking at railways, roads, shipping, and airports. The pace of construction of new roads will be accelerated. Roads for coastal connectivity have been identified. The budget lays considerable emphasis on airport upgradation in Tier 2 cities.
The finance minister also spelt out new measures for railways. Laying of new lines, safety of passengers, improving cleanliness levels, and introducing end-to-end logistics solutions for moving commodities across India are the thrust areas. A point to note is that this is the first budget where the government is looking at a multi-modal approach to transportation, trying to achieve synergies across investments in railways, roads, waterways and civil aviation.
Renewable energy has been highlighted in the Budget as well. The finance minister stated that the second phase of solar park development will be taken up with a target of 20,000 MW capacity. The government has also set a target on achieving 100% village electrification by May 2018.
What is noteworthy about this budget is that there were no hikes in indirect taxes or excise duties. Another positive move is the effort to improve the ease of doing business. The minister has announced reforms to the FDI (foreign direct investment) policy, and said that the Foreign Investment Promotion Board (FIPB) will be phased out later this year. Other announcements include reforms to the labour laws and the commodities markets.
Most of the finance minister’s pronouncements fall under his proclaimed theme for the budget – a move to Transform, Energise and Clean India. In a surprise move, the government has taken a big step towards clean governance – cash donations to political parties will be capped at Rs.2000, cheque or digital payments will be the preferred mode, and electoral bonds can be issued to collect funds. These initiatives will positively increase transparency in political party funding.
Fiscal discipline and prudence were the essence of the budget. The finance minister mentioned that the budget would peg the fiscal deficit at the 3.2% level. On the whole, the budget has brought in a lot of positivity. The economic outlook for India now looks much brighter, thanks to a well-rounded budget.
Kumar Mangalam Birla is the Chairman of the Aditya Birla Group