Missing out on faster growth: N R Bhanumurthy

The Budget attempts to strike a balance between growth by boosting infrastructure investments and development through increases in allocations to agriculture and rural development. While it looks like a fine balance, it perhaps missed the opportunity of achieving a 8 to 10 per cent potential growth - as suggested by the Economic Survey - in the medium term. To achieve this, one should have increased public investments this year itself. But what we really see is a decline in public investment from 1.4 per cent to 1.3 per cent (as a ratio to GDP).

This is expected to increase to 2.4 per cent in 2017-18 and 3 per cent in 2018-19, which could be a difficult proposition. This Budget has clearly focused more on agriculture and rural India. This could create additional demand that is required for reviving growth. Based on the gaps between the budgeted and revised numbers for 2015-16, one can clearly say that the government had mis-judged the role that existing rural development programmes, say Mahatma Gandhi National Rural Employment Guarantee Scheme, play when there is a downturn in demand. This Budget also assumes a decline in subsidy bill. But it is not clear whether it includes the implementation of the National Food Security Act from 1st April 2016 across the country.

N R Bhanumurthy
Professor, National Institute of Public Finance and Policy