As Mr. Jaitley outlined at the outset in his marathon one and a half hour speech, the overall approach was to spend more in rural areas, infrastructure and poverty alleviation, even while aiming at maintaining the best standards of fiscal prudence. Giveaways and goodies to all those who stoically bore the brunt of demonetisation marked the fiscal proposals as both individuals and companies too stand to benefit by his measures outlined for the next fiscal.

At the macro-level, the 2017-18 budget which was advanced by a month to begin the next fiscal year on April 1, 2017 ,has outlined ten distinct themes to underpin the broad agenda of boosting growth and ushering in a cleaner administration and economy. How far this will pan out would be known only when the real players gain confidence in the post demonetization phase to pick up their scattered wits to do their routine operations.

The 10-themes touch upon farmers through enhanced agricultural credit at Rs 10 lakh crore for 2017-18, to rural population by stepping up outlays on employment and basic infrastructure including rural roads, to the youth by energizing them through education, skills and jobs, and to the poor and the underprivileged by beefing up the systems of social security, health care and affordable housing. In the infrastructure, the stress is on imparting efficiency, productivity and quality and in the financial sector, the approach is to build robust institutions. In the digital economy, the emphasis is on speed, accountability and transparency while in the public service, the budget outlines steps to ensure effective governance and efficient service delivery through people’s participation. In the prudent fiscal management front, the stress is to ensure optimal deployment of resources and preserve fiscal stability and in tax administration, the approach is to honoring the honest taxpayers.

As this budget is also unique in amalgamating the railway finances with the General Budget, the Finance Minister has proposed to synergize the investments in railways, roads, waterways and civil aviation so as to ensure an effective multi-modal logistics and transport sector. This would make the economy more competitive. The Indian railways would get the total capital and development expenditure at a massive Rs 1.31 lakh crore for the next fiscal with an additional Rs 1 lakh crore corpus Rashtriya Rail Sanraksha Kashis for a span of five years. Transportation sector as a whole gets a budgetary allocation of a massive Rs 2.41 lakh crore for 2017-18 which would spur “a huge amount of economic activity across the country and foster more job opportunities”.

But the finances of the railways adverted to in the statements of fiscal policy accompanying the budget document draw a dismal picture of the iconic Indian Railways (IR) that had only a past to gloat over with a future that is fraught. Thus the revenue earnings of the arterial mode of transport estimated at Rs 1,72, 155 crore are likely to register an insipid growth of 4.8 per cent in revised estimate 2016-17 over 2015-16 (actual). On the other hand, the ordinary working expenses (OWE) and the pension expenditure at Rs 1, 62,760 crore are estimated to escalate by 17.6 per cent.

The authorities’ claim that the high growth in OWE in the current fiscal owed itself to provision of Rs 15,000 crore towards meeting the additional burden on salaries and pension on account of implementation of 7th Pay Commission recommendations. No wonder the operating ratio in the revised 2016-17 for the IR is estimated at 94.9 per cent, the unhealthiest sign of fiscal fitness for any system to amble on! The blame is laid on the traditional passenger services where under-recovery of fares is to extract a humongous upwards Rs 30,000 crore. With the Centre extending a gross budgetary support of Rs 55,000 crore in a planned capital outlay of Rs 1.31 lakh crore for the next fiscal (against an estimated total outlay of Rs 1.21 lakh crore in revised 2016-17 estimates), the railways might be left with little option other than revising fares for both passengers and the freight before long if they have to fend for themselves on their own.

Mr. Jaitley contends that the overall fiscal position is likely to maintain an improving trajectory in view of the marginal tweak in fiscal deficit target from 3 per cent to 3.2 per cent to accommodate massive public investment proposed in the budget post-demonetization. Interestingly, the budget assumes high level of receipts is projected through non-tax revenues and disinvestment in the next fiscal. For instance, disinvestment receipts including strategic sale of stakes in central public enterprises is estimated at Rs 72,500 crore against the revised estimates of Rs 45,500 crore and the budgeted figure of Rs 56,500 crore in the current fiscal. Again, the growth in gross tax revenues in budget estimate for the next fiscal at 12.2 per cent over the revised estimates of 2016-17 is also, albeit subdued, compared to the growth of 17 per cent estimated for the current fiscal. But in the current fiscal, the taxpayers had a slew of amnesty scheme and also had the facility of paying their earlier arrears of tax in demonetized high value notes. So the budgetary assumptions of healthy revenue receipt needs to be seen against prospective downside risks to growth impulses, both domestic and exogenous.

Overall, the Finance Minister has done a dexterous exercise, skirting on thin ice but bolstered by the revenue buoyancy he was able to get through the cleaning operations and shock therapy of demonetisation of high value currencies in the current year. Whether the various relief measures and pump-priming exercise through stepping up public investment in social and physical infrastructure would pay off with other factors in the system acting favorably would settle how the score on growth cards would be in the next years and the years to come.
(IPA Service)