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Budget 2017 | It Ticked All The Right Boxes

All the policy issues that I had raised after the demonetisation drive, have been addressed in the Budget

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If i were asked, if the Union Budget meets my expectations, I would say yes.

Overall, I would say, it’s a good budget.

All the policy issues that I had raised after the demonetisation drive, namely income tax reform, real estate policy reform and political reform for corruption have been addressed in the Budget.

An effort has been made to use efficient methods to help the poor.

The income tax reform will help sustain better compliance induced by demonetisation. Similarly, the measures relating to real estate and affordable housing will help revive the sector and also help in reducing the black element of price. The announcement of specific measures relating to political funding were beyond expectations.

On the expenditure side, the most important step was the increase in capital expenditure by a stated 24 per cent. This will reverse the slow/marginal growth witnessed in the last few years and hence, help revive overall investment.

There is a question whether the budget allocations and reforms for rural sector and agriculture will actually boost these sectors.

Suggested reforms in contractual farming, agricultural produce market committee (APMC) and e-markets will help improve agricultural-rural growth.

There is a major thrust on rural and agricultural reforms. The government is rightly focused on e-market and the reforms of APMC.

The proposed simplification of labour laws will positively impact labour-intensive manufacturing, including textiles, leather products and electronics sectors.

I would say, instead of dramatic changes, the finance minister has chosen incremental changes. After the upheaval created by demonetisation, this will have a soothing effect on market and economic participants, so normal growth trends can resume in 2017-18.

For the last two-three years, I have been known as a fiscal hawk. I thought the monetary policy needed loosening and the fiscal policy needed tightening.

This particular government has established its credibility.

As for rating this Budget, I would do so on the basis of benchmarks I set after demonetisation. How will the negative after effects of demonetisation be minimised and more importantly how would this Budget make way for potential sustainable and long-term benefits?

I identified three potential benchmarks. The first expectation was voluntary compliance to increase within the year, and I went on to say that income tax reform was absolutely essential to make this sustainable. That part has been met. Personal income tax reduction, I think was very important to signal to those who are honest tax payers that they will be favoured in one way or another.

The second one was in terms of real estate; I expected the ‘black’ element of prices and of real estate to go down. A number of measures have been announced in this Budget that shows that the government has been serious about this matter.

Finally, the general level of corruption prevalent in the economy. One of the most important things that needed to be done there was to start with political corruption issues. And that actually has also received some weight, which was a little bit of a surprise for me, though hints had been given by the Prime Minister.

(As told to Regina Mihindukulasuriya and other TV Channels)

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Arvind Virmani

The author is a former chief economic advisor to the Government of India

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