More often than not, a pre-election budget is considered to be a populist one. This year’s budget however, seems to have struck the right chord, with the fine balance between development oriented and social sector initiatives. The Finance Minister has focused on structural goals with the overall aim of strengthening the building blocks of the economy to achieve consistent growth.
Agriculture and the rural economy are the beneficiaries of several policy initiatives and fund allocations in this Budget. The attempt to increase income for farmers has been designed around a well thought through framework comprising higher procurement prices, a series of significant e-Governance initiatives that will link APMCs and create upgraded Village Agricultural Markets. These initiatives, along with an ambitious increase in agricultural credit, will ensure that the various sub goals set out in the form of increased exports, growth in organic farming and sustaining the food processing sector are achieved. In order to spur capital investment, the separate investment funds proposed for irrigation, agri-markets, fisheries and aqua-culture is expected to have the desired spill-over effect across the rural economy. The last mile delivery of such initiatives has always been an area of concern and we look forward to the Government now focusing on successful implementation of the proposals to reap the intended benefits. Overall, the policy announcements and allocations regarding social sector highlight the continued commitment of the Government.
The aspirational national health protection scheme is one of the boldest moves of this Budget and is a step closer towards a universal health insurance scheme. Driven by public-private partnership, this has the potential of transforming the Indian social security and healthcare landscape, which is today limited by affordability and accessibility. The successful implementation of this mega initiative would require focused capability and skill building, intense monitoring and discipline backed by robust technological framework.
A doubled allocation to the Digital India Programme, alongside tasking the Niti Aayog to initiate a national effort on early and enhanced adoption of next generation technologies like artificial intelligence and block chain would also drive the broader objectives of improving the quality of education, healthcare and job creation. The e-office and e-governance initiatives listed out are noteworthy, and encompass several functional areas of the Central Government. With continued rigour and focus, the administration machinery will benefit in the coming years.
An all-time high allocation to the roads and railways sector demonstrates the Government’s commitment to propel infrastructure development. The success achieved in awarding and fast tracking road projects through online monitoring system is likely to be replicated to other core sectors to achieve the desired results.
On the tax front, buoyant with the growth of direct taxes and number of effective tax payers/ filers, the budget proposals strive to keep the momentum of increasing the tax base. The implementation of the GST and several tax measures in the budget will go a long way in breaking the present inertia of tax-GDP ratio, which, despite the economic growth, has been largely flat for several years.
There are not many significant takeaways for corporates or individual taxpayers in terms of incentives, and perhaps the constant expectation of these needs tempering. One may argue that there was scope to further incentivise foreign and domestic investment to meet the broader objectives of job creation and infrastructure development, which have remained unaddressed in the tax proposals.
The Insolvency and Bankruptcy Code has been one of the biggest structural reforms of the Modi Government and given the rising number of cases coming up under the Code, various practical issues have been ironed out over time to facilitate insolvency resolution. The tax pin pricks have also now been addressed with proposals of providing relief from Minimum Alternate Tax and allowing carry forward of losses. All these developments would have a net positive impact on pricing and making stressed companies more attractive to potential buyers.
One area the Government could have addressed is the ever growing and unfruitful tax litigation, which was highlighted in the economic survey. There are no significant proposals aimed at reforming the tax administration system. Given the substantial amount of arrears locked up in litigation, the Government may want to think of creative options of liquidating these amounts almost in a manner of treating them as NPAs.
Maybe this would get addressed in the new Direct Tax Code, which is on the anvil. With the implementation of structural reforms, like demonetisation, GST, the insolvency and bankruptcy code and recapitalisation of banks, the Indian economy is pegged to be on the path of high growth and set to achieve its rightful place on the global stage. Budget 2018 strings together a perfect balance, making investment in fundamentals which can potentially acts as a catalyst to propel the desired social and economic growth required in India.
(The author is Chairman PwC India. the views expressed in this article are not those of Fortune India)
