Finance Minister Arun Jaitley presented his third Union Budget on Monday. Over the last few weeks, there was a lot of talk on the major concerns facing the economy and how a fine balance could be struck between fiscal consolidation and much-needed public spending. It was a tough task indeed, but the Budget 2016 seems to make a good deal of effort to hit the right note. The fiscal deficit target is retained, but the development agenda is not compromised. It lacks out–of–box measures, but comes with some major reform promises. There are obviously some turn offs, but overall the arithmetic seems commendable, particularly considering the additional fiscal burden likely to be added due to 7th Pay Commission award a
nd implementation of OROP.
A key feature of the Budget is its thrust on strengthening the agricultural and rural India. Several measures proposed – including allocation of Rs 35,984 crore for agriculture and farmers' welfare, Rs 86,500 crore for irrigation for five years, Rs 15,000 crore interest subvention for agricultural loans, Rs 5,500 crore for crop insurance, Rs 38500 crore for MNREGA, Rs 8500 crore for rural electrification – show this shift in focus, which, I think, will help boost farm sector growth and rural demand that have been hit by two consecutive droughts. Also, employment creation, socio-economic progress and long-term economic growth will also get a big push by these measures in the long run.
The Budget gives a much-needed push also to the infrastructure sector. Jaitley announced Rs 2.21 lakh crore for the sector. Of the total, a sum of Rs 55,000 crore is allocated for roads and highways, which will be further topped up by additional Rs 15,000 crore to be raised by NHAI through bonds. The total investment in the road sector including PMGSY allocation would be 97,000 crore. It is also encouraging to see the Budget's emphasis on affordable housing. For public sector banks, a sum of Rs.25,000 crore is allocated towards their recapitalization, but I think the amount is woefully inadequate, considering severity of the NPA problem. In addition, the Budget promises financial reforms, but no concrete measures are proposed for addressing the sector's woes.
As far as the MSME sector is concerned, the Budget has come with several welcome measures, including increase in the turnover limit of tax for MSMEs from Rs 1 crore to Rs 2 crore, increase in disbursement target under PM MUDRA Yojana to Rs.1,80,000, three-year tax holiday and one–day registration of start–ups, lowering of Corporate IT rate for companies not exceeding Rs. 5 crore turnover, allocation of Rs. 1,700 crore for setting up 1500 multi-skill development centres, etc. These measures are encouraging, but they alone may not be enough for the sector. A lot more could have been done. A big miss, for example, is lack of proposals to make listing and exit simpler for the sector. The Budget lacks a clear-sighted approach to transform the sector.
I invite your opinions.
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