OPINION: The Pragmatic and Visionary Union Budget of 2018-19

New Delhi: Union Finance Minister Arun Jaitley along with MoS Finance ministers Shiv Pratap Shukla, P Radhakrishnan and Economic Affairs Secretary Shaktikanta Das leaves the North Block to present the Union Budget at Parliament, Feb 1, 2018. PTI

New Delhi: Union Finance Minister Arun Jaitley along with MoS Finance ministers Shiv Pratap Shukla, P Radhakrishnan and Economic Affairs Secretary Shaktikanta Das leaves the North Block to present the Union Budget at Parliament, Feb 1, 2018.
PTI

The Union Budget 2018-19 is pragmatic in its approach, and visionary in nature. In the current scenario where state and general elections are looming over the horizon within next 15 months and given the limitation of the global economy, this is a realistic budget for the current macroeconomic scenario.

Fiscal policy is an important component of macroeconomic stabilization strategy. The economy operates with given level of capital, labor, and technology. To enhance the capacity of the economy to grow, it is necessary that capital and labor are adequately supplied. The government has been making efforts to ensure adequate supply of capital to economic agents and therefore recapitalizing public sector banks. It is now proposed to even allow strong regional rural banks to raise capital from the market to enable them to increase their credit to rural economy.

In view of the fact that 66 per cent of the population is below 34 years of age and unemployment is high in this segment, employment generation is a priority.

To ensure supply of skilled labor, the government has proposed new initiatives in education. To enhance the quality of labor force the government is considering training the teachers, treating education holistically without segmentation between nursery to class 12, and structuring higher education financing agency to revitalize education. The government is considering setting up institutions of eminence, a specialized Railway University, new schools of planning and architecture, and encouraging young bright engineers to pursue research in elite national institutions.

To improve health and avoid absenteeism, the government plans to launch a flagship, health coverage scheme to cover 10 crore poor and vulnerable families by providing them cover up to Rs.5 lakh per family per year for hospitalization. The government also plans to have 1.5 lakh centers to provide comprehensive health care, free essential drugs and diagnostic services. Similarly, to ensure healthy labor force 24 medical colleges and research centers have also been proposed.

The medium, small and micro enterprises (MSMEs) are the engines of employment. To encourage financial resources to the MSMEs technology platforms would be utilized. The government is setting up a model skill centers in each district of the country and considering boosting the textile sector. Defence production policy aims to promote domestic production by public sector, private sector and MSMEs. And to encourage MSMEs, tax concessions have been proposed at the cost of Rs.7000 crore to the government. In the 150th year of Mahatma Gandhi’s birth anniversary, Village and Cottage Industry should have been the focus of reviving the rural economy. The emphasis given to MSMEs is encouraging but there is now a need for establishing MSME University with in-house provision of research capabilities, in each state.

To enhance growth and encourage commerce, the government is considering boosting infrastructure in the country. Smart cities are being developed across the country where smart roads, solar roof-tops are being implemented. The Bharat Mala project aims to provide seamless connectivity of interior and backward areas and even the border areas. The government is considering a special purpose vehicle to fund the resources. The airline services are being expanded to 56 unserved airports and 31 unserved helipads across the country. The government plans to enable broadband access to 2.5 lakh villages and 5 lakh Wi-Fi hotspots.

To boost employment and development of the rural sector, where nearly 60 per cent of India resides, a number of schemes have been announced. These include encouraging farmer and village producer organizations, national bamboo mission with enhanced outlay, promoting export of agro commodity by setting state-of-art testing facilities in mega food parks, boosting investment in food processing, and setting up of infrastructure fund for agriculture and animal husbandry.

To encourage employment, 10 tourist centers are being developed as iconic tourist stations. These tourist destinations will follow holistic approach involving infrastructure and skill development, development of technology, attracting private investment and branding. Further tourist amenities at specified monuments of the select historical monuments will be upgraded to enhance visitor experience. To encourage employment the stipulation of minimum period 240 days is relaxed to 150 days in the case of apparel, footwear and leather industry. The customs duty on all mobile phones has been raised as well as on televisions to promote more jobs within the country.

The housing sector has linkages with nearly 275 industries. To encourage housing sector, the government has established an affordable housing fund in the National Housing Bank which will be funded from short-fall of priority sector lending and fully serviced bonds authorized by the government.

The tax to GDP ratio in India is around 18 percent while in advanced countries it is above 30 percent. The government mentioned that demonetization and GST has helped in bringing new tax payers in the country. In the financial year 2016-17, 8.6 million new tax payers filed their return of income as against 6.6 million in the previous year. The effective tax payers have increased from 6.4 crore in April 2014 to 8.3 crore in March 2017. To facilitate higher compliance, the government had earlier liberalized presumptive income scheme for small traders, entrepreneurs and professionals. In 2016-17, 41 per cent more returns were filed emphasizing that more persons are joining the tax net. In 2017-18, 4.5 million tax returns from individuals and firms were received. Now the Government is evolving a scheme to assign to every individual enterprise in India a unique ID. In order to have audit trail of income of trusts and institutions payment exceeding Rs. 10000 in cash will be disallowed in subject to tax. The government has also clarified that it does not consider crypto currency as legal tender but will explore use of block chain technology for assuring digital economy.

The Union Budget has been carefully drafted and has long run implications. The strategy to encourage education and health will result in skilled and healthy labor force. The proposals for the financial sector will ensure adequate supply of capital. The development of tourist places and infrastructure, encouragement to housing and MSMEs, and establishment of Wi-Fi hotspots in rural areas will generate opportunities for large industries. Thus, the Budget provides for a vision of a new modern India, where Bharat is being developed as a worthy partner.