Intro: The Union Budget 2015-16 finely balances diverse aspirations of all the stakeholders, with an intense focus upon putting the economy back on track for a double digit growth, without undermining the fiscal discipline.
Deliberate balancing of diverse aspirations in the budget has even overwhelmed the former Prime Minister Dr Manmohan Singh, who in his prima facie reaction about the budget has even said that the ‘budget has all the good intentions’ and to redeem his political compulsions only, he then added that it is ‘devoid of any road map to redeem these intensions’, knowing it well that such road-maps have to be chalked out by the respective ministries. Indeed, the Finance Minister Arun Jaitley has uniquely blended his proposals to well incentivise savings, extend the outreach of social security and pension cover up to the last person, enhance employability of vast masses through widespread skilling and to promote self-employment through liberal support for start-ups and also through proposal to refinance advances made to micro-enterprises by creation of the Mundra Bank (Micro Unit Develop-ment and Refinance Agency Bank).
The conscious push of Jaitley to spread and extend the outreach of social security net, especially retirement pension offerings, using the Jan Dhan platform and the Pradhan Mantri Suraksha Bima Yojna offering accident with an insurance cover of Rs 2 lakh at a nominal premium of just Rs 12 per year is admirable. The Pradhan Mantri Jeevan Jyoti Bima Yojana extending an insurance cover Rs.2 lakh between the age of 18-55 years at a premium of just Rs 330 per annum is equally commendable which aims to take social security net to the poor who need it the most, in case of natural death as well. The Finance Minister has also very boldly signaled his government’s commitment to the rural jobs scheme by allocating a higher sum for the purpose.
A very serious push given by the finance minister to book to the ‘parallel economy inhabitants’, stashing black money abroad, by proposing to pass a tough law against those holding undisclosed assets abroad, with a punishment up to 7-10 years imprisonment is also most welcome. Ten years’ rigorous imprisonment and 300 per cent penalty on those who conceal income and assets abroad are unprecedented tough measures that send the signal that this government means business on the issue of curbing illegal foreign accounts. The penal provisions against stashing black money abroad with imprisonment up to 7-10 years would all help to save out-flow of foreign currency and enhance the exchange value of Rupee which has already gained 6.3 per cent in its value vis a vis dollar. The attempts to monetise gold by gold deposit scheme and sovereign bonds are also potent vehicles to get the illegal gold hoarded by the parallel economy into the mainstream and further help to crush current account deficit.
This initiative to harness and monetise the idle gold locked in family holdings, would help to reduce gold imports. The proposals of raising import duty on finished products like imported trucks and buses or the steel would curb import of such products and thereby incentivise indigenous manufacturing. The finance minister has well reflected his intentions to revive industrial growth by providing an intial sum of 1,200 crore for Delhi-Mumbai corridor and 1 lakh crore for 5 Ultra-Mega Power Projects to eliminate power constraints coming in the way of industrialisation. The liberal allocation for infrastructure to the tune of 70,000 crore, to construct roads up to 1 lakh km by 2,022 along with corporatisation of port trusts for harnessing more funds for ports sector and provision of more than 24,000 crore for roads and railways besides 29,420 crore for highways would go in a big way to improve infra structure and revival of industrial growth by kick starting project investments. The proposed National Investment and Infrastructure Fund with an initial outlay of 20,000 crore would further help in a much better way mobilising funds for infrastructure.
The idea of an electronic bill discounting platform for MSMEs is also an excellent one that will address the cash flow problems of the smallest of businesses.
Agriculture and Rural Develop-ment have been taken care of well with enhanced target for agriculture loans from the present level of 8 lakh crore in 2014-15 to 8.5 lakh crore for 2015-16, coupled with a rural infrastructure development fund established under the NABARD, Rs 5,300 crore for irrigation, Rs 125 crore for organic farming in North-East and 15,000 crore for long term rural credit fund. All these would incentivise, the agriculture and rural development.
Sensing the emerging needs of business and the corporate sectors as well a significantly higher allocation for infrastructure, phased reduction in the corporate tax rate, a microfinance refinancing agency, a law to handle disputes in public contracts and a bankruptcy code have also been proposed.
Coming to the fiscal discipline, we see that Jaitley has also met the toughest target of restricting the fiscal deficit for the year close to 4.1 per cent. Inspite of massive shortfalls in tax revenue and disinvestment proceeds. His firmness on cutting unwarranted expenditure has paid rich dividends, inspite of the fact that the Finance Commission has taken away a sizeable chunk of money away, by giving it to states as the total devolution of central funds to states has gone up from 5.4 per cent of GDP in 2013-14 to a budgeted provision of 7 per cent in 2015-16 budget. Notwith-standing, this very substantial loss of fiscal space, the central deficit has been brought down by 0.6 per cent of GDP for first two years of the Modi government from 4.5 per cent of 2013-14 to 3.9 per cent in 2015-16.
On presuming that if no other changes would have taken place in State finances, then the combined deficit of the Central and State governments could drop from seven per cent of GDP to 4.8 per cent in these two years.
This comes to be the lowest of combined deficit since the onset of the 2008 financial crisis, inspite of the fact that the economy has not been in the best of health out of cumulative policy paralysis of the UPA.
So, India will now cease to be in the list of countries with high fiscal deficits. The most laudable achievement of Modi Government is that, India is now the fastest growing economy in the world.
Dr Bhagwati Prakash Sharma (The writer is the Vice-Chancellor of the Pacific Academy Higher Education and Research, Udaipur, Rajasthan)