Maintaining fiscal deficit at 3.5 % of GDP is a bold decision: C Rangarajan

However, allocation of Rs 25,000 crore for PSU banks is inadequate, former PMEAC said

The commitment to fiscal consolidation, maintaining fiscal deficit at 3.5% of GDP is a bold decision. The question is whether this is credible and we will have to look at the revenue projection and expenditure projection for this, said C Rangarajan, chairman, Madras School of Economics & Former Chairman of the Prime Minister’s Economic Advisory Council (PMEAC).

He was speaking at an interactive meeting ‘Analysis of the Union Budget Proposals – 2016-17: Implications for Industries and for Public’, organised by The Southern India Chamber of Commerce & Industry (SICCI), Chennai.

Rangarajan said that the focus of the Budget is public expenditure in agriculture and infrastructure such as road and railways. This is wise and will ensure assets are created. 

However, whether they get translated into real assets is the question.

“The government should release a statement of progress in projects in real terms from time to time. Public spending in infrastructure can stimulate the private economy which is not doing too well now,” he added.

“Expenditure is not too clear though as it does not fully reflect the Seventh Pay Commission. There is a need to remove the distinction between planned and unplanned expenditure and allocate resources. For instance, hospitals and schools are planned expenditure, but doctors and teachers fall under the unplanned expenditure,” said Rangarajan and further added that revenue reforms are minor.

While stating that expecting non-tax revenue to go up by 24.7% is debatable, the gross tax revenue projected at 11.7% is achievable.

“Banking is going through tough times and the Rs 25,000 crore allocated is inadequate. The budget talks of ease of business and for this, cumbersome procedures must be avoided and the administration structure and delivery improved. What is required is maximum governance and minimum government, something which is not happening yet,” said Rangarajan.

Dr. S Narayan, former finance secretary, Government of India, in his address said that this budget will give a fillip to the economy but not in the usual way we are used to.
 

For the first time in 15 years, revenue deficit has come down by 1.5%, budgeted borrowings for next year are less than the last year. The ‘Make in India’ program has been given concessions in nearly 200 sectors. When it comes to road transport, now anyone can start a bus service, this is revolutionary.

 “Banks are excited because RBI is allowing rebooking of asset value in balance sheets and banks can sell their assets and this will bring in crores, a simple way to do it,” he added

 Dr. Palani G. Periasamy, President of SICCI & Chairman of PGP Group of Companies said that this is a rural-agri budget and has come to relieve agrarian distress, the theme is village democracy. Fiscal consolidation that the budget promises will bring macro-economic stability. The positive factors include the digital drive and skill development.

"When it comes to initiatives promised such as getting a company registered in a day, I wonder if this is possible. Sectors like ethanol, sugar and tourism have been left out of the budget and there is not much incentive for investors.”