This government has finally accepted that demonetisation is going to bring down GDP to 6.75 per cent. This roughly translates into a loss of 1.5 lakh crore in the interim to an already sluggish economy. The ill effects of demonetisation have become visible while the so-called benefits elude us.
The finance minister said that spring is a season of hope. He should have confessed that politicians are essentially dealers in hope. The Budget clearly demonstrates that the finance minister is far removed from the prevailing economic situation. This budget is presented with an eye on politics. Empty promises, with no roadmap, like doubling farmer incomes in five years sound like poll promises.
This government is high on rhetoric, short on facts. The Prime Minister in campaign mode promised one crore jobs annually. In 2016, 1.35 lakh jobs were created as per Labour Bureau data. At the end of every month there are almost 10 lakh youngsters looking for a job who are being let down. This challenge is not been addressed in the budget.
The finance minister has not convinced us on revenue projections that will finance the budget’s populist schemes. On the revenue side, earnings may not turn out to be as expected. The Government may have to provide a clearer picture of how it intends to finance budgeted programmes. The Budget proposes increase in spending on infrastructure but this is largely restricted to railways, roads and the rural and allied sectors. Without revenue earnings based on reasonable projections, such increased allocations will remain on paper.
With reference to allocations to agriculture and allied sectors, the Budget fails to address the impact of demonetisation on farmers. Though agricultural credit is fixed at ₹10 lakh crore, there is no realisation that farm loans are already declared as NPA’s and therefore, farmers will not be able to take advantage of the credit facility. The government, instead, should have waived farmers’ loan so that credit could be accessed.
The road to recovery should have been possible by incentivising private investment and generating consumer demand by putting more money in the pockets of ordinary folk. Indirect taxes should have been lowered, which in turn would have increased consumer spending.
Skill development is a long-term measure and will not give immediate dividends. Labour reforms require State governments to come on board. Digitisation requires investment in digital infrastructure, which is not seen in the budget numbers. The fibre-optic network connecting 2.5 lakh gram panchayats is not likely to be completed even till 2019. Without last mile connectivity, the benefits of digitisation cannot be realised. There are other manufacturing issues connected with digitisation, which too, have to be put in place. The budget papers do not reflect any attempt to address these issues. The Budget ignores the manufacturing sector. The textile, leather, hosiery and diamond industries needed incentives to kick start manufacturing and create jobs. The informal sector needs incentivisation, being the hardest hit on account of demonetisation.
Exports are in decline. There should have been some indication in the budget about how the finance minister will be addressing this issue. There should have been some financial incentives for export growth, especially since international developments will make some of our industries non-competitive. The IT sector in particular will be facing hard times. The minister did not address this concern as well.
The revenue numbers will only be available by March 31 of this year. Before that, all revenue projections are only speculative. Consequently, it is not understood how allocations of this magnitude could be made without ascertainable numbers for revenue collection. This is a non-reformist budget. Difficult times require the Government to stand up and guide the economy with a firm hand. Both the Prime Minister and the finance minister have failed to rise to the challenge.
(The writer is a Senior Congress leader and former union minister)
(Article Source: This article was first published on BusinessLine, dated February 1, 2017)