Wednesday, 1 February 2017

Budget '17 : Education, Health, Defense and Prudence

This budget was unfortunately along expected lines; that said – it had some good elements. While there were no specific bad points, it represents yet another lost opportunity. This is a majority Government, it can make decisive moves. Its ability and firmness in making decisive moves has already been demonstrated; in that light, this continuing series of trends I point  out in this analysis seem strange. What is more, with the passage of time, fewer and fewer people are even talking about these points. I refer to Health and Education expenses, among other things.

If we glance at Pg 14 of the core document {refer bibliography} giving the itemwise expenditure, we see that Education receives only 79686 Crores. This represents 0.57% of our GDP {taken as 2095.4 Billion USD}. Health gets a princely 48878 Crores, representing 0.35% of our GDP. Now in both these cases, even states incur expenses; so these are not definitive numbers. Now glance at the allocation to the states, which has increased from 834483 Crores in 2015-16 to an allocation of 1085075 Crores in this budget. Similarly, Defence is at 2.74 L Crore; but we do need a higher expenditure on this item.

We need a mechanism to ensure that the states invest in Education and Health – is that happening? How do states use those funds? For that, we will have to do a separate analysis; but the center, though not in the budget speech, needs to lay a vision for the states for these two priority sectors – and communicate the same to the people. To the best of my knowledge, this has not been done as far as communication with the people is concerned! For Defence, it is  not that easy; finding resources in a developing democracy will need sacrifices; and we, the people, need to communicate to the center that yes, the people of India are ready to make sacrifices. The choice is ours to make!

Another point of note is the inherent defensiveness and the popularism that this {for that matter, any} budget contains. As others have noted, this is a remarkably restrained budget; given the overall scenario confronting us, one would have thought that for once, the Government could have abandoned Excessive Fiscal Prudence for a more expansionary {or rather liberal as opposed to constrained} fiscal policy. Point 135 on Pg 26 of the budget speech gives us some indication : the FRBM review committee has recommended Debt and Fiscal Targets; my only doubt is, and it is only a doubt – could we afford a more liberal stance on Government Debt, and maybe a Fiscal Deficit Range to target, giving the Center more flexibility to maneuver? Fiscal, Monetary and Growth requirements are typically a trade-off; one needs to strike a proper balance. Prudence is appreciable, unequivocally so; but balance is equally vital!

I have stated popularism above; let me first of all appreciate that the popularism is also surprisingly restrained, responsible and along a defined strategic direction, as well as along expectations. We are seeing a Government that is thinking, and responsible. Yet, I am not satisfied; maybe I have set my expectations high. Where was the need for revising Taxation rates? This could have been taken up next year. The savings would be, as per budget speech, Rs. 15500 Crore – Pg 35, Point 176 of Budget speech; this would free up revenue to be used in a productive manner! I cannot see a reason to celebrate the tax reduction at all! Yes – moderation is required; but that should happen after the tax net has been widened, creating space for moderation!

I can appreciate the emphasis on the MSME Sector and the proposals for this sector; tax exemptions to this sector are actually a very powerful stimulus to growth, and are thus welcome. The Personal Tax slabs could have been kept as they are for next year. We needed the money elsewhere is my humble submission; Defense, or even MNREGA, which has been allocated 48000 Crore, against a revised estimate of 47499 Crore for FY 16-17, as per Pg 16, Budget at a Glance.


The entire point of my article is that we should be focusing on Growth, and what is required for Growth. This budget does take some appreciable steps; I shall look at them in a subsequent analysis. But this is a majority Government; it could have taken hard decisions. Furthermore, we need to, as a nation, invest far more in productive avenues, and increase expenses on sectors that can fuel growth in a defined direction; a direction which enables us to develop selective competencies vis-à-vis other nations. While I do appreciate that this budget is probably a good budget, safe and secure, building confidence; my heart does ache, yet again, for another missed opportunity…

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