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‘Budget 2018 Should Be Focused On Job Creation And The Rural Economy’
If I were FM, I would be conscious of the fiscal deficit target and try not to exceed it even though this has been a difficult year
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As Budget day comes near, ideas on what the Finance Minister can do are being exchanged and I too have a few of them. But first let me outline my take on where we are as an economy. The recent advance estimate indicates that GDP growth slowed down to 6.5 per cent in 2017-18 compared to 7.1 per cent in the previous year. Looking at the quarterly numbers, it is apparent that GDP growth bottomed out in the first quarter of the current year and is expected to accelerate steadily. So as FM, I would pencil in a higher growth rate of around 7.5 per cent for 2018-19, when I do the Budget numbers.
This would mean a better growth of revenue even without accounting for greater compliance. In order to give a further boost to revenue, I would act on a promise I made three years ago on reduction in the corporate tax rate. While I did implement it for smaller corporates, I had held back for larger ones due to revenue concerns. I believe it is now the right time as the economy is turning around and globally, there is a move to reduce tax rates. With the applicability of minimum alternate tax (MAT) and dividend distribution tax (DDT), the overall tax burden on the Indian corporate sector is one of the highest in the world.
If I were FM, I would be conscious of the fiscal deficit target and try not to exceed it even though this has been a difficult year. The revenues from GST have not yet stabilised and it is possible that there may be a shortfall. There has also been a large shortfall in non-tax revenue which needs to be made up. On the positive side, disinvestment receipts have been strong and we hope to meet our target this year. I will explore all means to ensure that the deficit target is not exceeded by a large measure. The recent improvement in India’s credit rating is a gain not to be reversed by excessive deficits.
At the same time, it is important that expenditure on essential requirements be stepped up, including public spending on physical and social infrastructure. The rural economy needs a booster, given that agriculture has not performed well in the current financial year. Speeding up investment in rural infrastructure such as irrigation and rural roads and post-harvest infrastructure such as cold chain and warehousing would be critical. Increased availability of agricultural credit and crop insurance can mitigate some of the rural distress visible in some regions. An empowered group of state agricultural ministers can be created to drive reforms in agriculture.
It is imperative to step up spending on human development so that we can leverage our demographic dividend. The Prime Minister’s endeavour to focus on 100 backward districts and transform them is a very innovative idea. As Finance Minister, I would step up the spending on health, education and skill development. I would also look for possible ways to collaborate with the private sector, which can play a critical role if the terms of engagement are made clear. It is time to strengthen the public private partnerships not only in physical but also in social infrastructure.
As FM, I would like Budget 2018 to be focused on job creation and the rural economy.
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.