By Ashwani Mahajan
KOLKATA(THE STATESMAN/ASIA NEWS NETWORK) - The common man struggling with the problems arising post demonetisation had been expecting a lot from the Budget for 2017-18. From that angle, the Budget seems to have been an underachiever.
Income tax exemption limit remained the same, though the rate was halved and those with an income of 5 lakh rupees (S$10,600) got a relief of 12,500 rupees. For more relief, perhaps they need to wait till next year.
In the name of the Ministry of Micro, Small and Medium Enterprises (MSME), some relief was given to companies with a turnover of 50 crore rupees or less and they will now pay 25 per cent less tax.
It was expected that after demonetisation the government would be able to get more tax from those who deposited their black money in banks; and that riding on higher tax collections, the government would spend more on education, health and other social services. However, Budget 2017-18 seems to have disappointed people. Though the size of the budget at 21.47 lakh crore rupees is bigger by 1.5 lakh crore rupees than the previous year, social services failed to get the expected hike in allocation.
Whether it is fiscal deficit or a deficit in the balance of payments on current account (CAD), the economy is in a much better situation than it was a few years ago. Last year the Finance Minister budgeted for a fiscal deficit of 3.5 per cent of GDP, which has been achieved; for 2017-18, a lower target of 3.2 per cent has been set.
If we leave aside the short term pains of demonetisation, the economy seems to be on the track of fast growth, and India continues to be the fastest growing large economy of the world.
The deficit in the balance of payments on the current account (CAD), which was one per cent of GDP in 2015-16, had come down to only 0.3 per cent of GDP in the first half of 2016-17. Our foreign exchange reserves have reached a level sufficient for import bill of 12 months. Finance Ministers claim that inflation is largely under control. On growth, inflation, foreign exchange reserves and fiscal management,the economy is in a better position. The FM terms this as a "bright spot".
It is said in the budget that requisite changes would be made in the law to bring down prices of essential drugs and health equipments. Production of generic drugs would be encouraged. The Budget also talks about opening a new All India Institute of Medical Sciences.
However, these provisions are not sufficient. People lose their savings and whatever assets they have for treatment of their near and dear ones. According to studies in this regard, nearly 10 per cent people go below the poverty line every year due to this reason only.
Therefore, it was expected that the budget would provide something big towards public heath which is lacking in Budget 2017-18.
The Budget's emphasis seems to be on the objective of achieving a smaller cash economy through incentives and infrastructure building. Incentives and cash back on transactions using popular UPI app, 'Bhim App', making Indian Railway Catering and Tourism Corporation railway booking free of cost and taking Optical Fibre Network to 1.5 lakh gram panchayats are some of the efforts made in this budget.
These efforts are targeted towards digitisation aimed at bringing in efficiencies in transactions. However confusion prevails on how safe these transactions would be.
Another argument, perhaps rightly so, is that with more digitised transactions, credit worthiness of traders and businessmen would improve and it will help them raise more resources for their growth. With the help of digitisation, government subsidies and other transfers could also reach the right people without any leakage.
The Finance Minister's major attention and rightly so, has been on rural roads, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), irrigation, agriculture and allied activities. He has allocated significant amount of funds (to the tune of 1.87 lakh crore rupees). This way, his attempt is to make our rural economy stronger.
Linking MGNREGA to development with a target of building 500,000 new ponds, is yet another appreciable step. Better allocations for rural roads, the Prime Minister's housing scheme and rural electrification and similar other programmes are steps in the right direction. Budget allocation for drinking water in arsenic and fluoride affected areas has perhaps been made for the first time.
By providing 4 lakh crore rupees for infrastructure, the government has given a boost to infrastructure like rail, road, air transport and power sector. However, we need to keep the same going if the nation is to move on the fast track of development and bring itself to the level of developed countries. Better allocation for defence shows the commitment of the government for country's national security.
To somehow show that the government is trying to lift all hurdles for foreign investment and also that it is committed to bring 'ease of doing business', the Finance Minister has proposed closing down the Foreign Investment Promotion Board (FIPB).
This shows desperation of the government to get FDI at any cost. This is a cause of concern. It is notable that many a times there are dangers linked to FDI. If FIPB closes down, then restraints on 'bad FDI' would go and we may be subject to several threats to our economy and even national security. The government should reconsider this proposal.
Today America and European nations, which themselves had been the proponents of globalisation, are promoting protectionism. President Donald Trump is giving a new doctrine of Buy American - Hire Americans and Britain has severed its ties with the European Union.
It seems extremely surprising that our policy makers are still pleading for foreign capital, free trade and globalisation and are willing to go any distance for foreign investment. We need to mend this mindset.
The writer is Associate Professor, Pannalal Girdharlal Dayanand Anglo Vedic College, University of Delhi.