Budget 2017: What’s Good & What’s Not So Great?

 

If you rated the Budget only on the basis of market euphoria, then it was quite easy to conclude that this is perhaps the best Budget in recent times. But the question is whether this euphoria is really sustainable for the longer term? How credible is the fiscal consolidation roadmap that the Government has charted out?

The Finance Minister, Arun Jaitey, presenting his fourth Budget on the floor of the Parliament, raised the 2017-2018 fiscal deficit target to 3.2% of the GDP. The number is pretty much in sync with market expectation and in fact the bond markets have already factored in this much deficit. What’s particularly striking though is the fact that the quality of deficit has shown some improvement.

The plan is to ramp up spending in rural areas, overall infrastructure layout and mitigating poverty. The fiscal deficit target is set to cover this kind of spending initiative. The lower tax rate is a positive element that most would be happy about. In an effort to widen the tax net, the rate of income tax has been reduced to 5% on income between Rs 2.5-5 lakh from the current 10%. This cut is expected to boost spending to the desired level that the Government intends to take it up to.

Affordable housing is a major monitorable and a primary prerogative for the Government.

A boost to it is surely great news but perhaps a bigger focus on the entire housing sector would have created a better impact. The prospect of an interest rate cut can be another major booster.

That apart a cap on the cash donation is set to bring about a certain amount of transparency to the entire political donation scenario. But one aspect that’s been trouble is the potential for new job creation. That surely required a larger focus and better spelling out of opportunities.

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