The 2017 Budget: India’s Shift to a Market Economy| Vishal Sinha & Vamsi Karedla

Vishal Sinha & Vamsi Karedla

Come 1st of February and the nation awaits to listen to what he government has in store for us, a bunch of self proclaimed financial experts sit glued to the TV screens in hopes of deciphering the ministers monologue, while Mr. Palkhivala drafts his speech for the Wankhede Address. Sound familiar? These are the scenes that typically transpire on the day  the budget is announced. This time around it was expected that there would be some headline grabbing policy changes, considering that country was coming off the back of the demonitization move. Here at Catharsis, we would like to bring to you a simple, clear cut analysis of the budget, straight to the point, without beating around the bush.

The first thing that grabs the eye is that the budget deviated from a plan expenditure to a more flexible unplanned expenditure. A clear indication of the same, would be that the market system in India shifted from a highly regulated and compartmentalised system to a more liberal approach where the market forces will play an instrumental role in deciding the manner in which the budget proposals will be seeing the light at the end of tunnel.  Getting into the nitty gritties of the budget proposals, the first aspect that is to be looked at is the intent of the  bolstering the growth of markets in the rural areas. A good number of surveys have shown that there is a considerably noticeable lag in the growth of rural areas in terms of essentials such as education, connectivity, and other basic requirements that have been majorly lacking in the rural areas. Along with an increase in the expenditure allotted to rural areas, the aims of the government have been nothing less than lofty, with the aim of setting up around 1,500 multi-skill training centres for the major purposes of increasing the job creation in those areas where there has been a considerable lag. This move seems to resonate with the vision of creating a knowledge based economy, however, the efficiency of the implementation is, and still will continue to be in question.

While looking to exert influence on a multitude of sectors and a broad spectrum approach, it is undeniable that there is a strong undercurrent that is seeking to promote the ‘Make in India’ drive, by creating a higher transparency factor, in the rules, regulating both domestic and foreign investment. It is pertinent to note that another important aspect which the government has desired to improve on is the aspect of bettering the ranking or the score on ease of doing business. The 2014 report returned with a rather disappointing score, and the government has placed a lot of reliance on the aspect of ensuring that a high percentage of efforts and funds are moving towards the purposes of creating an environment that is conducive for business. This can be traced back to the economic roots of the government which believes in the philosophy that better economic growth will equate to better growth and in turn create a better overall market which is efficient, core competent etc. With the above goals in mind, there is a definite shift in the manner in which the government has decided to steer the economic progress in the country. While, the previous government had placed emphasis on having a planned budget, whereby the top brass felt that a clear compartmentalisation in terms of sector spending was the way to go forward, and with the rollout of the new budget, it is safe to say that the above philosophy has been completely abandoned and a more open system of free market oriented setup has been favoured over the other. In furtherance  of the above mentioned motive of the government, it has gone on to create a better start up ecosystem, by reducing the number of bureaucratic hoops that a particular business unit requires to go through, while at the same time proposing to create a separate credit slab for the purposes of boosting the conduciveness for the growth of the business in the realm of start-ups, thus bringing one back to the conclusion- that a clear attempt is being made by the government to view the economic overview of the government from the perspective of creating  an economic atmosphere where the thrust of the economy is innovation. This seems to be the philosophy of such a move, but at the same time the success of the same, is one which can only be evaluated with time.  A point of note here would be the fact that, despite the underlying idea behind the budget being the observance of fiscal discipline, costs, questions do loom over how the government will maintain fiscal discipline, especially in the context of incorporating the OROP scheme within its fold. The OROP scheme is inherently a resource depleting scheme owing to the fact that pay scales need to be adjusted, and is expected to cost around 7500 Crore to the government, this is only exacerbated with the issue of having a to incorporate the recommendations of the 7th pay commission as well.

So that’s all folks, the budget has a bit of everything, some lofty goals, some pragmatic, but the one thing that it lacked was the presence of a headline grabber, and has become a rather routine affair. Almost like a Greek epic, without the Greek hero.

 But going past the rhetoric and the wordplay, the budget does outline some important aspects of the government’s future plans and the Prime Minister’s vision, but the implementation of the same is a different ball game.

 

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