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    Hello and welcome to the chat with Madan Sabnavis, Chief Economist, CARE Ratings on Budget impact on economy


    Hello everyone!

  • S


    What will this govt do with the PDS kerocene?


    Presently this subsidy remains. but I do think that in course of time we would migrate to a system where one pays the market prices. while this may not work well with the poor, if one follows what successive governments have done with all fuel products, it appears that they would like to withdraw subsidy and make it more targeted. hence, there would be some kind of screening of households to begin with before we could go the same way as LPG. Besides if we are talking of universal basic income, at some point we will do away with this scheme all together.

  • M


    FM Jaitley mentioned about mini labs in krishi vigyan. What is it all about and as an young entrepreneur how can I see scope in that field?


    The government is earnest in its endeavor to make farming more resilient. Mini labs are those which can be used by small farmers in smaller places - which do not have access to the usual R & D that is required by farmers. but we have to see as to how these labs work and how the funding is done. are there tax breaks available or are there any schemes drawn up by the banking system for funding. my sense is that such labs are already in existence. but one needs to check with the ministry of agriculture as to how this works from the point of view of setting up the same. not sure if the web site has any details.

  • V


    What is the impact of Budget on IT industry?


    I should think that with the entire focus now being on digitization, the related sectors in hardware and software should receive this one time booster. but to my mind the main problem for the IT sector is related to the developments in the US on the visa issue. this is one area where the government has to take it up at the diplomatic level.

  • S


    Does the fiscal deficit target of 3.2% for FY18 look achievable?


    There are doubts today mainly on the disinvestment target which has always fallen short. the government has been pragmatic with the GDP growth target and hence other revenue receipts. but it does appear that it will be aggressive on disinvestment this time and hence 3.2% will be achieved. we must remember that the IDS money has not been included overtly in these numbers and if they are large, should provide sufficient cushion.

  • P


    When can we expect Universal Basic Income to become a reality?


    It will be a long process. first, we need to take the states along too. second, to do so we need to have the money which cannot be addressed even today if we want to provide the amount to only those below the poverty line. third, there is the system of identification of the deserving which is always the challenge. fourth, while we can say that we remove all subsidies which includes education/health/ etc, I think it is the job of the government to create social infrastructure and not leave it to the people who are given money to decide the same. hence, UBI may not be feasible in the near run. besides, giving it without any link to employment or condition (like education in brazil) runs the risk of moral hazard.

  • A


    Will GST have any impact on the country's GDP?


    There are two issues here. first, when GST comes in there will be more enterprises which hitherto were out of the tax net, get revealed in order to take advantage of the tax credit. this will automatically lead to an increase in GDP in the first round. second, ours' is not an economy where we have not been able to supply goods because of high tax rates. complex tax system creates a high cost economy and makes doing business irksome but does not limit production. therefore, I would tend to think actual production may not go up unless prices come down. But we are all the time talking of a revenue and inflation neutral rate. besides, even when tax rates come down, rarely does it get reflected in the final prices of goods in our country. therefore, I would say that in first year it could go up due to better accounting, but subsequently the benefit would be insignificant.

  • S


    Did you see any significant change in the real widespread distribution of GDP?


    No. we have not seen any significant change in GDP composition. we remain a service oriented economy and the main thrust in growth is coming from the three sectors: trade,transport etc, banking finance, real estate and government sector. we need manufacturing to grow by 9-10% per annum on a continuous basis to bring about this transformation.

  • T


    The Budget 2017 appears to be a guarded one, perhaps because it comes on the backdrop of demonetisation. What, according to you, are the measures in Budget that will boost the economy?


    Two measures will help to grow the economy though I would be guarded on the word boost as the amounts involved may not be very high. for example, infra push in the budget is an increment of Rs 30,000 cr over revised estimate of FY17. this is a good amount to ensure growth takes place but we need private investment to take off for high growth. similarly tax concessions to households will release some funds but the amount may not be that high to propel the economy forward at a fast pace. a boost to investment through corporate tax cut could have hastened the process.

  • A


    What is the major source of revenues for the govt? Is it corporate tax?


    there are essentially five sources of taxes for the union government which matter. first is corporation tax which is the largest and accounts for around 20%. this is follo0wed by income tax with 15% and excise, service and customs. for customs and excise the base has to increase - i.e.; imports and industrial production. as long as they are low, which has been the case in the recent past, collections tend to get affected.

  • J


    How will the tax reductions impact the economy?


    tax reduction for individuals will give more money to households which can be spent or saved. the hope here is that the money will be spent given that the demonetization impact on consumerism was quite sharp. but the amount involved may not be too high to cause a major shift in consumption. for the SMEs a lower tax rate will make them more profitable, be better placed to service loans and make them go in for higher investment.