"Budget has to stimulate demand": Experts

The Union Budget for 2017-18 will be different from previous ones, feel policy analysts and economists.  “Budgets traditionally have looked at the supply side, while not giving equal importance to creation of demand. That’s where Budget-2017 has to be different,” according to Prabhu Chawla, editorial director, The New Indian Express. 
 

Setting the tone for the pre-Budget panel discussion at IIM Lucknow, Chawla said Budget 2017-18 must create more demand in the hands of the people. “For that to happen it should be a Budget for Bharat and not for India,” he added. He underlined the need for re-distribution of income, creating equal opportunities for everybody. 
 

Another panel member, Rakesh Nangia, managing partner, Nangia & Co, a tax advisory firm, noted that the forthcoming Union Budget would be closely scrutinised on its efforts to mitigate the impact of demonetisation on the common man and reviving the consumer sentiment. Further, the Budget has to stimulate private investment that has stagnated over the last two years, he said.
 

To strengthen government’s capacities to stimulate demand it important to improve India’s tax-to-GDP ratio by attacking under-reporting of income, Nangia said. “Only 3.6 crore people in a nation of 125 crore file tax return. India’s tax-to- GDP ratio is currently pegged at 17%, as against Asian average of 25%,” he added.
 

Addressing a group of 200-odd students and faculty members from IIM Lucknow and other colleges, N R Bhanumurthy, professor, National Institute of Public Finance and Policy, New Delhi, highlighted the macro-economic uncertainties that Budget 2017-18 will have to tackle.  
 

“One does not know the full impact of demonetisation on the economy and on the GDP estimates for FY 2016-17,” he said. The other uncertainties stem from the global situation where there is a clear trend towards de-globalisation, he added.  “We are a domestic demand -driven economy. In that situation what will happen to our exports. There is also uncertainty around commodity prices,” Bhanumurthy said. 
 

He was of the view that the challenge before the government would be to meet its revenue deficit targets while stepping up public capital expenditure.
 

Another panel member H N Gupta, former principal advisor to the Planning Commission, felt there is strong need to re-look at fiscal deficit target of 3% for FY 2017-18. “There is no harm in easing the targets for fiscal deficit. Investment must come in sectors such as road, ports and railways that help revive jobs,” he said.
 

In an interactive session with panel members several students sought clarifications on issues such as the merits and de-merit of expanding the tax net versus targeting under-reporting of income, the need to check misuse of charitable trusts for generation of black money, and why agriculture income has been kept outside the tax net.