India's Union Budget 2017

Feb 4, 2017

Little late to join the experts to comment on this year's Union Budget.

India is the only developing country in the world where submission of government accounts and Annual Budget is a very highly pitched event right from the independence.The speech contains words like poor, dalit, under-privileged will be repeated n number of time. Every budget have reduction in the taxes on items mostly consumed by the below poverty line including beedi and imposing high taxes on wine, spirit, cigarette, fine dining and other luxury items. Contrary to this, In developed economies like USA and European nations people hardly bother when these accounts are submitted in senate or parliament is not a high pitched event. Take for example USA. United States budget process traditionally begins when the President submits a budget request to Congress. This happens without big television or newspaper debates.

This year's budget highlights and citing past year's achievement stated by government are as under :

* Sanitation coverage in rural areas has gone up to 60 percent
* Swachh Bharat Mission has made tremendous progress in promoting safe sanitation and ending open defectation
* By 2019 all passenger coaches of railways to be fitted with bio-toilets
* 1 crore houses to be completed by 2019 for houseless and those living in 'kacha' houses
* Rs 19,000 crore in 2017-18 for PMGSY; together with contribution from states, Rs 27,000 crore to be spent
* Total allocation for rural, agricultural and allied sectors for 2017-18 is a record Rs 1,87,223 crore, up 24 percent from last year
* Target for agricultural credit in 2017-18 has been fixed at a record Rs 10 lakh crore
* Coverage of Fasal Bima Yojana to go up from 30 percent of cropped area, to 40 percent in 2017-18, 50 percent in 2018-19
* NABARD to set up dedicated micro-irrigation fund to be set to achieve Per Drop More Crop mission
* Corpus of NABARD's long-term irrigation fund raised to Rs 40,000 crore
* Mini soil-testing labs in Krishi Vigyan Kendras to ensure 100 percent coverage
* Highest ever allocation to MGNREGA at Rs 48,000 crore
*Merger of Railway Budget with Budget 2017 a historic step
* Transform, Energize and Clean India - agenda for the next year
* Advancement of budget will enable all ministries, departments to operationalise all schemes right from beginning of next fiscal
* Demonetisation was aimed to create a new normal, where the GDP would be bigger, cleaner and real
* Effects of demonetisation not expected to spill over to next year
* Firmly believe that GST, Demonetisation, built on JAM, will have an epoch-making impact on the lives of our people
* Demonetisation aims to create a new normal, where the GDP would be bigger, cleaner and real
* Recalls MahatmaGandhi's words: A right cause never fails
* 3 challenges in current global scenario:Monetary stance of US FED Reserve, Commodity prices specially crude oil & retreat from globalisation
* Government says that it has moved from a discretionary administration to a policy-based administration
* Expectations included burning issues like inflation and price rise, issue of corruption & crony capitalism
* Government says that it was elected amidst huge expectations of people, the underlying theme of expectations being good governance
* Government expects to resolve all issues regarding GST via consultations
* Government feels that it is moving from informal to formal economy and the government is now seen as a trusted custodian of public money
* Hope to resolve all issues regarding GST via consultations
* We are moving from informal to formal economy & the Government is now seen as a trusted custodian of public money
Sluggish growth replaced by high growth; war on blackmoney launched. More steps will be taken to benefit farmers and the weaker sections; budget being presented during weak global economy, says Jaitley
*"Monetary policy to be expansionary in major economies. Uncertainty around commodity prices especially oil to have impact on emerging economies."
*CAD declined from 1 percent last year to 0.3 percent in first half of current fiscal. Protectionism is increasing
*36 percent increase in FDI flow; forex reserves at $361 billion in January enough to cover 12 months needs
*We are seen as engine of global growth; IMF sees India to grow fastest in major economies
*Demonetisation was a continuation of series of measures taken by govt in 2 years; it is bold and decisive measure
Effects of demonetisation not expected to spill over to the next year, said Finance Minister. GDP will be bigger, cleaner after demonetisation.
Demonetisation will help in transfer of resources from tax evaders to government

*Government took two tectonic policy initiatives - passage of GST Bill and demonetisation
* Demonetisation will help in transfer of resources from tax evaders to government
*Only transient impact on economy due to demonetisation; long term benefit include higher GDP growth and tax revenue
*Merger of Railways Budget with General Budget brings focus on a multi-modal approach for development of railways, highways and inland water transport
*Functional autonomy of the railways to be maintained, says Jaitley. Pace of remonetisation has picked up; demonetisation effects will not spill over to next year, says Jaitley
*World Bank expects GDP growth rate at 7.6 percent in Financial Year 2018 and 7.8 percent in Financial Year 2019. Our agenda for next year is to transform, energise and clean India
*Spend more in rural areas, infrastructure, poverty alleviation, while maintaining fiscal prudence as guiding principle of Union Budget. Budget presentation advanced to help begin implementation of schemes before onset of monsoon
* Government committed to double farm income in 5 years. Plan, non-plan classification of expenditure done away with in the Budget for 2017-18 to give a holistic picture
*Mini labs by qualified local entrepreneurs to be set up for soil testing in all 648 krishi vigyan kendras in the country
*Demonetisation was a bold and decisive strike in a series of measures to arrive at a new norm of bigger, cleaner and real GDP
*Space technology to be used for monitoring MNREGA implementation
*100 percent electrification of villages to be completed by May 2018
*Rs 27,000 crore on to be spend on PMGSY; 1 crore houses to be completed by 2017-18 for the homeless
*Sanitation coverage in villages has increased from 42 percent in October 2016 to 60 percent, a rise of 18 percent
*Government proposes to provide safe drinking water to 28,000 arsenic and fluoride affected habitations.
*To construct one crore houses by 2019 for homeless. PM Awas Yojana allocation raised from Rs 15,000 crore to Rs 23,000 crore
*Rs 500 crore allocated to set up Mahila Shakti Kendras; Allocation raised from Rs 1.56 lakh crore to Rs 1.84 lakh crore for women and child welfare
*Two new AIIMS to be set up Jharkhand and Gujarat
*New rules regarding medical devices will be devised to reduce their cost
*35 percent increase in allocation for Supreme Court to Rs 52,393 crore
*Railway tariffs to be fixed on the basis of cost, social obligation and competition.
*Budget allocation for highways stepped up to Rs 64,000 crore in financial year 2018 from Rs 57,676 crore
*Over 90 percent of FDI proposls are now processed through automatic route. FIPB will be abolished.
*Second phase of solar power development to be taken up with an aim of generating 20,000 MW
*Rs 2,74,114 crore allocated for defence expenditure, excluding pension; This includes Rs 86,000 crore for defence capital


This time the first discussion I attended at K.C. College, it was organised by International Vaish Federation and JITO, both the organisations predominantly headed by the leading Chartered Accountants. S.P.Tulsiyan, Viral Punamia and motilal Oswal. They discussed budget as per the market perspective. Market was stressed during Novemeber, December 2016 and January 2017 due to demonitisation effects. As election is 5 states is around corner, government has avoided taking any harsh measure in the budget and tried to please all segments and result was as expected. The market rallied.


The India Business Group organised budget meet in Bandra Kurla Complex and invited star investment adviser Navneet Munot who is CFA of SBI Fund Management. He feels that Prima facie, we the overall fiscal arithmetic is credible.On the taxation front, three strong positives came in the form of reduction of corporate tax to 25% for small business, no service tax hike and no increase in holding period for availing long-term capital gain tax in shares.

The union budget has managed to curtail the net market borrowing to Rs. 3.6 trillion as it increasingly resorts to small savings funds to finance the fiscal deficit. However, bond market may remain largely un-impacted by the budget given the overhang of SDLs and supply of UDAY discom bonds and GoI serviced bonds.With the event now behind us, the focus will shift back to the execution, corporate earnings and global cues.

Yesterday, I was invited by Indo Amercian Society, where Kundan Vyas, editor Vyapar and Bharat Shahwere there as key note speakers. Kundan Vyas while appreciating the spirit behind the budget, but he was of the opinion that until and unless funding of political parties is not made transparent, not much can be achieved.

On the other hand, Bharat Shah highly praised this year's budget saying that first time after independence, for the first time, budget has taken care of economy in toto rather than taking piece meal and populist steps.

I come back to my original premise that our democracy is matured enough, and we should stop making budget as political tool rather than focusing on development.