It’s only the tip of the iceberg, bigger changes are on the way

Finance minister Arun Jaitley has delivered a real solid Budget to the nation — it’s a no-nonsense Budget, reflecting consistency and continuity of his government’s policies. In doing so, Mr Jaitley has surprised people as many were expecting the Budget to be somewhat populist for two reasons: one to compensate for the hardships that people were made to go through as a result of the recent demonetisation, and two, to woo voters in the coming elections in Uttar Pradesh, Uttarakhand, Punjab, Goa, and Manipur.

However, the basic thrust of the Budget continues to be on promoting broad-based economic growth. Although economic growth is a function of both internal conditions and external environment, not all of which is one’s control, India is projected to grow anywhere between 6.75 per cent and 7.5 per cent during 2017-18. From growth perspective, three things that stand out in the Budget are: thrust on agriculture, infrastructure and housing.

On the agriculture front, the Budget contains wide-ranging initiatives aimed at boosting agricultural growth. For example, the government intends to provide agricultural credit at a record level of `10 lakh crores during 2017-18, increase the coverage of Fasal Bima Yojana from 30 per cent to 40 per cent of the cropped area, establish new mini-labs in all Krishi Vigyan Kendras in the country for providing soil sample testing facilities, double the allocations to the long term irrigation fund set up in Nabard and so forth. Similarly, the allocations for dairy processing and infrastructure development fund is proposed to increase four-fold, to Rs 8,000 crores over three years.

The agriculture sector is expected to deliver a significantly higher growth of 4.1 per cent during 2016-17, compared to 1.2 per cent in 2015-16. The set of initiatives announced in the Budget is expected place the agriculture on a higher growth trajectory.

Similarly, the Budget has made the highest ever allocation of Rs 48,000 crores in 2017-18 to MGNREGA, the rural livelihood security programme in rural areas, which is likely to play a significant role not only in providing incomes in the hands of rural folk but also in the revival of the rural economy. A strong growth in the agriculture sector is not only good for the rural economy but for industrial growth too.

On the rural housing front, the Budget has increased allocations to Pradhan Mantri Awaas Yojana to Rs 23,000 crores in 2017-18 — up from Rs 15,000 crores in 2016-17. A significant push to rural housing, known to have strong linkages with other sectors such as construction, steel, cement, electrical goods, sanitaryware, paint and furnishing, and so forth, is bound to have a higher multiplier effect.

On the infrastructure front, the government has made a huge provision Rs 2.4 lakh crores for the transportation sector as a whole which includes rails, roads and shipping. This should definitely spur economic growth in a big way.

A few announcements in the Budget promise to have an impact on economic growth over the medium to long-term. Skill development initiatives which again is high on the government’s agenda is likely to impact economic growth over medium to longer term. The government proposes to extend PM Kaushal Kendras (Skill Centres) to 600 districts countrywide. Similarly, the government proposes to establish 100 India international skill centres across the country. These initiatives are highly important both from growth and employment generation perspective.

The Budget is not only about allocations. It is also reflective of the government’s intentions, going forward. It is indicative of the policies and programmes that are in the making and will be announced as and when those get finalised. In promotion of labour-intensive sectors, the Budget indicates the government’s intention of promoting sectors such as leather and footwear along the same lines as the textile sector, and giving special thrust to the electronics industry too.

There are a number of initiatives that are aimed at improving the long-term efficiency of the economy. One major reform is in labour laws. The Budget does indicate the areas — wages, industrial relations, social security and working conditions — in which these reforms will be undertaken.

Actually, the Budget is a pretty rich set of documents dealing with several issues. Economic growth is only one of the dimensions. Further, preparing an annual Budget is a tough act, involving a tightrope walk as it calls for balancing several interests, often competing ones.

Mr Jaitley has done a superb job from the perspective of promoting economic growth. I am sure what we see in the Budget is only the tip of the iceberg. A lot more will happen. A lot will happen outside of the Budget as most reforms are structural in nature, more policy-driven than allocation driven.