A kind of new era of the Union Budget starts from 2017 onward. The NDA lead BJP government has already replaced the erstwhile Planning Commission with Niti Aayog, thus giving a new focus to boost economic development. There are two new and significant things have been done in this Union budget. First, Union government has represented its Budget 2017-18 at the beginning of February. The colonial era of tradition of presenting the Union Budget on the last working day of February has been departed.
Let me explain first about the Union Budget. Basically, The Union Budget of India, also referred to as the Annual financial statement in the Article 112 of the Constitution of India and in fact, it is the annual budget of the Republic of India. Till 2016 it was presented on the last working day of February by the Finance Minister of India in Parliament. But after 2017 onward it is decided by the Government to presents it on the first day of February so that the legislative approval for annual spending plans and tax proposals could be completed before the beginning of the new financial year on 1 April.
Secondly, apart from it Merging of Railway budget into General Budget is also a kind of new idea. This would definitely bring railway at the centre stage of the government fiscal policy. Railway will be depoliticized from political pressure like introducing new trains in home state to get votes. So, progress take place in a better speed. Railway is made not for profits but it is for no profit no loss type mission to connect all the society of our country. Ethically Railways have been marginalised and accused for having losses.
Always Railways ministers have been seen at the corner stage. But after this budget onward expenditure on projects will be started from the beginning of the financial year. Whatever losses will generate that could definitely be compensated through union budget. Financial autonomy will definitely be preserved regarding expenditure and receipt. It can shift money to constant flow and maintain equilibrium. This will definitely make railways empowered to work freely.
The emerging economy faces major challenges. In spite of taking transformational reforms India is standing very straight in front of world economy. There are three major challenges come before merging economy. First, The current monetary policy of the US federal reserve. It increases policy rate more one in a year which leads to lower capital inflow and higher outflow of emerging economy. Secondly there are uncertainty around commodity prices like prices of crude oil and shale gas.
It impacts on fiscal calculation of the emerging countries. It is so because emerging countries spend most of the dollar savings in importing crude oil which is related to the inflation. Third challenge arises before emerging economy is increasing retreat from globalisation of good and services in the world. There are several regional groupings have been done in order to fetch throne of trading. But the thing is that developed country always becomes leader of that respected grouping and exploit the developing countries.
But India stands very straight in all kind of economy crisis what happened in recent years and maintain the economic status at equilibrium, what has been promised in last years. Indian economy successfully weathered a number of shocks like FCNR (Foreign Currency Non-Repatriable account deposits) deposits, volatility of US election and hike in American fed rate hike. Firstly, CPI inflation declined from 6% in July 2016 to 3.4% in December 2016. It is expected to remain with in RBI’s mandated range of 2% to 6%.
Secondly, India’s CAD (current account deficit) decreased from 1% of the GDP to 0.3% of the GDP in the first half of 2016-2017. Thirdly, FDI increased from about 36% as compared to last year, which is a good thing. Fourthly, IMF forecasts that India is expected to be one of the fastest growing major economies in year 2017. Global reports speak the same. It says that India has improved its policy practices and economic profile. India has shifted itself from 9th position to 6th position in largest manufacturing rank.
The whole idea of budget has been constructed around the two transformational reforms. First introducing of Good and Service Tax (GST) bill and Demonetisation of higher denomination bank notes. Basically, this budget has 10 pillars. When we analyse the whole budget we will find that money allocation has been increased to all ten pillars. It is not a small hike but a large hike in money allocation has been found which would have been taken due to the confidence of GST bill and savings from demonetisation.
No doubt GST will definitely remove the cascading effect of taxes and reduce the end price of the commodities, which will lead to increase in savings of the people. That saving would turn into investments. Investment will increase business expansions and people would get job and will pay their direct taxes. Other than that, demonetisation will definitely work as a compliment to it. It has become very controversial now a day but if government converses their ideas at a fixed mission of the demonetisation then it would definitely help the government, otherwise it might push back.
The agenda of this budget for the upcoming year is TEC (Transform, Energise and Clean India). The agenda of TEC seeks to transform the quality of the governance and quality of life of our people. In all ten pillars, transformations can be easily seen. Secondly, next agenda of it is that to energise various sections of society, especially the youth and the vulnerable and enable them to unleash their true potential. This is a very unique feature of this budget where youth has been taken into account for discussion.
I also think that it is very necessary to talk about youth and take them into consideration so that new brains can come of the new ideas which may eradicate the errors. In the coming era youth of our country may lead the world because of increasing demographic dividend. And third letter of TEC tells about the cleaning the country from corruption, black money and non-transparent political funding. It has become very necessary to get rid of these evils which makes our country void from inside. Whatever plans are made that needs to be deliver on time efficiently and effectively.
It is not surprising me to see a well packaged budget setting out priorities appealing to the common man including quality of governance, routing out corruption and black money, cleanliness and digitization. In this bargain, industrialist wish list remains unfulfilled. However, it has effectively shirked off the tag which was imposed by the opposition of “Suit Boot Ki Sarkar”. Government is trying to manage a shift in their support base with the electorate. Apart from it, this budget marks a major shift in the government’s approach toward education. I will write another article in which I will talk in detail.
But overall, we can say the focus has shifted from funding and improving access education’s share of the Union Budget remains stagnant at almost 4% of the total budgetary allocations despite a 10% increase in fund to improve outcomes across the board. This is a kind of major shift which has never ever happened in the history. That’s why I am saying that this budget starts new era of Union Budget. It might be seen that they have focused on a few areas but the motto, idea and ethos of implementation makes this budget special.
In this way, this Budget has been making on account of advancing date of budget and subsuming of railway budget into general budget. Apart from that elimination of plan and non-plan classification of expenditure is also a new kind of experiment which starts a new era of Budget. Remarkable shift can be seen in the government tax policy of raising revenue by increasing tax rates to expanding tax base. Main benefits of it is that about 9% increase in indirect tax revenue and 15% increase in direct tax revenue in budget without significant increase in tax rate.
I mean to say that without changing actual tax rate government gets benefited only changing the structure of the budget which is a good thing. One of the important thing about it that this Budget laid emphasis on digitisation of tax administration which will make it more efficient. Use of IT systems to reduce human intervention and e-assessment will definitely ensure transparency of the system.
At the end, I would like to tell that a kind of budget is being tested in our country where main focus is concentrated on the ethos of the Budget. This is very different from the previous one budget in which consolidated budget along with railways have been represented. Time of presentation has been shifted to make it more effective. Classification of plan and non-plan expenditure give holistic views of the allocation for sectors and ministries which makes it very special. I will talk at micro level into next article.
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