Has the budget even started to address the dampening effect of demonetisation? Has it done enough to create employment opportunities? Is the allocation for government spending in the so-cial sector enough? These emerged as the focal points at a public discussion on the Union Budget 2017organised jointly by The Hindu Centre for Politics and Public Policy and the Southern India Chamber of Commerce and Industry at The Music Academy in Chennai.
The panellists included Raghavan Srinivasan, Editor, The Hindu BusinessLine , Praveen Chakravarty, Senior Fellow, IDFC Institute, C.V.S. Krishnakumar, Member, Taxation Commit-tee, SICCI, and R. Srinivasan, Associate Professor in Econometrics, University of Madras.
The broad scope of the discussion was set by Mr. N Ravi, Director, Kasturi and Sons Lim-ited and former editor of The Hindu . In his opening remarks, he asked if this was a sound Budget for normal times, or was it good enough for the difficult times. After the November 8 demoneti-sation, economic growth had taken a hit variously estimated between 0.25 to 2 per cent. Does the Budget address the dampening effect of demonetisation, he queried. Also, budgetary allocations for health, education and other social sectors needed to be looked at closely.
The discussion centred on the understanding of economic growth that was enshrined in the state’s annual financial planning and also broadly asked whether high growth mattered if it was not accompanied with adequate job creation.
Mr. Srinivasan, in his role as the moderator, stated that policy, when used to stimulate lend-ing, had a moderate impact. He said, “The budget has focused its firepower on issues that the government is certain about. Like roads. Has this budget gone far enough or bold enough?” In response to the point that the budget allowed for much infrastructure spending, Prof. Srinivasan responded by saying, “Governments are more biased towards infrastructure spending because it gives the government some leverage over expenditure. It is not inducted into the budget so the deficit won't go up.”
The discussion also touched on the fiscal deficit with Mr. Chakravarty stating: “The thing that is sacrosanct about the fiscal deficit is the S and P rating and that people within the govern-ment consider how S and P see the economy. This is considered very important. We have [Ru-pees] 15 lakhs crores of bad assets and that’s clogging the pipe. All of these go into how loan de-cisions are made and decide how much corporates can borrow.” Adding to the discussion about expenditure, Prof. Srinivasan said, “When the government is not even sure what its revenue is go-ing to be like, how has it planned its expenditure?” Mr. Chakravarty also informed the audience that “half of the tax revenues this year came from surcharges on petrol and diesel. So there is un-derstandable apprehension about where the future tax revenue will come from… The projection is for 25 per cent growth in personal income tax. Does this mean that the government does not ex-pect private investment to kick back in? So where will this income tax growth come from? From the deposits gained during demonetisation?”
Mr. Srinivasan asked the panellists to comment on whether the budget could be seen as so-cialist? Prof Srinivasan said that no government has ever said it is anti-poor. He pointed out: “The social sector expenditure is about 16 per cent. Everything is collected in the name of distributive justice. But is this really distributed?” He stated that no state in India had ever raised the issue of doing away with [Gadgil]-Mukherjee formula-based transfer of central taxes. He asked how states could be incentivised to spend on welfare more efficiently. “It doesn't matter to what ex-tent the money is allocated, 11 per cent or 12 per cent. What matters is how it is being spent.”
The general consensus amongst the panellists was that the budget had not gone far in terms of promising job creation. The panellists also responded to audience questions at length. An audi-ence member asked why India still insisted on economic growth indicators as a measure of eco-nomic activity. Mr. Chakravarty then pointed out that the same question had been raised in multi-ple international for a, the most recent being French president Nicholas Sarkozy’s committee un-der Prof. Amartya Sen. However, he stated that there was no other indicator to study a country’s economic development, other than the Gross Domestic Product (GDP). Responding to the idea about the political expedience of the budget, Mr. Srinivasan said that all political messaging in India is done by the Prime Minister at a time which is suitable to him and that there was an ab-sence of politics in the budget. "Clean prudent budget with no funky math to meet deficit targets. But boring cannot be exciting and we need it to do more and that's where it falls short," added Mr. Chakravarty.
Rafeeque Ahmed, President, SICCI, termed the budget as being “growth oriented” and “pathbreaking”. He said that the merger of the Railway Budget with the Union Budget brings to focus multi-modal approach to the development of railways, highways, and inland water transport.
The Hindu Centre'sBackground Note on Union Budget 2017: A Panel Discussion.
Audio link: Panel Discussion on "Union Budget 2017: A Panel Discussion", can be accessed here .
The Hindu , 2017. " More needs to be done on job creation ", February 4.
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