 "Budget 2016: Jaitley seizes last chance, but hemmed in by fiscal deficit target")
Budget 2016-17 was the canvas on which finance minister Arun Jaitley could have painted his most ambitious picture since the NDA government will more or less move into electioneering mode starting next year’s Budget.
Jaitley has largely used the opportunity. Since he has decided to limit the colour palette of the budget, set by the ceiling of an unchanged fiscal deficit target at 3.9 % for FY 16 and 3.5% for FY17, he has been frugal with additional spending. In FY 17 his additional resource base is just about Rs 90,000 crore. Of this, he must spend Rs 25,000 crore to recapitalize banks, and another Rs 40,000 crore for capital investment. Of this, Rs 17,000 crore is to be spent for investment in irrigation projects. To keep to the straight and narrow, he has used all the cess opportunities available like Krish Kalyan Cess to raise Rs 5,000 crore and another voluntary income disclosure scheme.
Has he been innovative, especially after his Economic Survey tabled on Friday has raised the expectations for new era of interventions? The minister has used some of them to raise the quality of interventions in employment creation and in infrastructure, and a key one in the financial sector, but has eschewed several others.
Since Jaitley does not have money to chase too many projects he has instead aimed at big bang institutional measures. He has announced plans to reframing of the Aadhaar bill as Targeted Delivery bill for Financial and other Subsidies. By linking the bill to subsidies, he has adroitly sought to defang opposition to the bill fearing privacy issues. The second is the tentative start to bank denationalization—the plan to reduce government holding in IDBI Bank to below 50% is a means to test the waters over this biggest relic of Indian nationalization story.
The other major intervention is the plan to underwrite the employers’ contribution for their new employees to the Employee Provident Fund. This will run for three years—in addition to the expansion of scope of tax incentive.
In short he has helped corporate India to get on with their investments, sticking to his bargain of fiscal prudence thereby making it easy for RBI to cut rates. And that is the big one from Budget for now
Jaitley has largely used the opportunity. Since he has decided to limit the colour palette of the budget, set by the ceiling of an unchanged fiscal deficit target at 3.9 % for FY 16 and 3.5% for FY17, he has been frugal with additional spending. In FY 17 his additional resource base is just about Rs 90,000 crore. Of this, he must spend Rs 25,000 crore to recapitalize banks, and another Rs 40,000 crore for capital investment. Of this, Rs 17,000 crore is to be spent for investment in irrigation projects. To keep to the straight and narrow, he has used all the cess opportunities available like Krish Kalyan Cess to raise Rs 5,000 crore and another voluntary income disclosure scheme.
Has he been innovative, especially after his Economic Survey tabled on Friday has raised the expectations for new era of interventions? The minister has used some of them to raise the quality of interventions in employment creation and in infrastructure, and a key one in the financial sector, but has eschewed several others.
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Would this budget be ascribed as the one that provided the right environment for India to pursue a 7.6 % GDP growth rate? The finance minister has offered a fiscally prudent budget but a the same time packaging it within political hardsell of appealing to rural India, said Rathin Roy, director NIPFP.
Since Jaitley does not have money to chase too many projects he has instead aimed at big bang institutional measures. He has announced plans to reframing of the Aadhaar bill as Targeted Delivery bill for Financial and other Subsidies. By linking the bill to subsidies, he has adroitly sought to defang opposition to the bill fearing privacy issues. The second is the tentative start to bank denationalization—the plan to reduce government holding in IDBI Bank to below 50% is a means to test the waters over this biggest relic of Indian nationalization story.
The other major intervention is the plan to underwrite the employers’ contribution for their new employees to the Employee Provident Fund. This will run for three years—in addition to the expansion of scope of tax incentive.
In short he has helped corporate India to get on with their investments, sticking to his bargain of fiscal prudence thereby making it easy for RBI to cut rates. And that is the big one from Budget for now