View from India: Union Budget aims to ‘transform, energise and clean’ India
One of the key themes of the Union Budget 2017-2018 is that of transition. India as a country is going through a transition, moving as it is from an informal to a formal economy.
Significantly, the Government is now seen as a trusted custodian of public money.
“With a 3.5 per cent expansion in total outlay, the Union Budget has aimed at sending out a clear indication that India is pacing itself for stronger growth and sustained development," said Richard Rekhy, CEO, KPMG in India. “With a fiscal deficit of 3.2 per cent, the budget has managed to find a balance between fiscal management and public expenditure to a considerable extent. The increase in allocation for agriculture and rural sectors, along with measures to digitise and enhance the flow of credit to agriculture stands out. A greater focus on the social sector is also appreciable.”
The Budget stated its future agenda, that being to ‘transform, energise and clean’ India, a vision enshrined in the acronym TEC India. Budget 2017 describes TEC India as follows:
Transform the quality of governance and quality of life of our people.
Energise various sections of society, especially the youth and the vulnerable, and enable them to unleash their true potential.
Clean the country from the evils of corruption, black money and non-transparent political funding.
Another noteworthy factor is that the Budget has set its vision on increasing its expenditure on rural areas, infrastructure and poverty alleviation. The agriculture sector is expected to grow at 4.6 per cent, agriculture expenditure targeted at Rs10 lakh crore.
‘Bolstering Bharat’ is a neat label for how the CRISIL Budget Analysis indicates that with an increase in credit availability, a focus on micro-irrigation and dairy-related activity will make farm incomes more predictable. It will bolster rural incomes and support consumption demand, which should benefit makers of consumer goods and durables, two-wheelers and tractors.
Increased outlays on roads, housing, sanitation and electrification through various schemes would make a difference to rural habitation. In the process, there would be significant opportunity to the construction, cement and metals sectors.
CRISIL also draws attention to the fact that in terms of infrastructure build-out, the focus is largely on transportation, especially railways and roads. There is a nearly 10 per cent increase in budgetary allocation to infrastructure, including a 24 per cent increase for national highways. Upgrading connectivity and improving logistical efficiencies have excellent multiplier effects.
For urban India, there is an 80 per cent increase in allocation towards metro rail. While new policy framework to encourage private sector investments in this sector is expected to facilitate faster execution of projects, land acquisition and multiplicity of approvals remain key challenges. This focus on transport infrastructure is expected to boost construction, engineering, metals, cement and logistics sectors. Over the longer term it should help reduce logistics costs and improve efficiencies, both of which are critical for the manufacturing sector to be competitive.
The Budget announced that safe drinking water will cover 28,000 arsenic and fluoride affected habitations in the next four years. Delhi and Jaipur will have solid waste management plants and five more are in the pipeline. Clearly the thrust is on the health sector. The announcement of new rules for medical devices is a welcome move for the life health sciences sector.
“The proposal by the Government to formulate new regulations for medical devices is a welcome move. India is one of the fastest growing markets for healthcare in the world and it is important that the country starts to design and manufacture medical devices that are best in class and follow international standards in quality and compliance. This will not only ensure patient safety but also make the domestic industry globally competitive”, explained Suresh Sugavanam, vice president and managing director, UL South Asia, a global safety science company that offers testing, inspection and certification services for products across different business verticals, including medical devices.
Overall, the thrust for greater transparency in political financing is particularly commendable. “The 79 per cent increase in allocation for infrastructure is noteworthy and it must now go hand-in-hand with synergising investments into the sector. The oil prices expected to begin ascending again, along with rising protectionist sentiments across the globe, warrant the need to augment non-tax revenues through disinvestment and efficient asset recycling,” Rekhy said.
Over the coming fiscal year, measures to remonetise India quickly, addressing the bottlenecks in infrastructure effectively and easing business persistently, will be pivotal. While the expected corporate tax lowering has not come through, the year will be memorable for India if the GST comes into force swiftly, if the adverse effects of demonetisation simmer down, and much of the well-rounded budgetary ideas get implemented.