N R Bhanumurthy: A fine balancing act

The Budget tries to achieve the fine balance between macro-fiscal aspects by targeting higher GDP growth and marginally relaxing of the fiscal deficit target. It focusses on growth with employment and for this, it would rely largely on MSMEs, infrastructure, housing, and agriculture.  For this, it increases both public investments and credit supply. 

 

On the taxes side, since the Goods and Services Tax (GST) is expected to be implemented from  July 1, there were few measures on the indirect taxes side.  However, on the direct tax, reduction in rate to 5 per cent for the Rs 2.5-5 lakh income group should expand the tax base and bring in new assesses into the tax net.  However, it brings in instability in tax rates as it will be now 5, 20 and 30 per cent, respectively. Special focus is on improving public expenditure efficiency through JAM trinity that could enhance public delivery mechanism and achieve good and transparent governance.

 

As demonetisation has crippled the private consumption demand, effort was to increase more allocation to agriculture and rural sector.  Together, public expenditure has been increased by about Rs 16,800 crore.  While this may not be sufficient to enhance demand in the rural area, with increasing states' role, there could be some success. N R Bhanumurthy

Professor, National Institute of Public Finance & Policy