Budget 2017

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Photo Courtesy : Pixabay

Amidst high expectations, Union Budget 2017-18 tried giving something to everyone by promising growth and employment whilst maintaining fiscal prudence. This is a different analysis of the budget involving certain sectors which matter us for the future.

The budget revolved around two themes viz. Formalization and Digitalization. If Narsimha Rao’s government is known for ‘liberalization’ and ‘privatization’, Narendra Modi’s government would be known for ‘formalization’ and ‘digitalization’.

Formalization:

Demonetization, ignoring its failures and criticisms, was successful in sowing seeds of transforming informal economy to formal economy. GST, on the other hand is the game changer. It would unify the market, change supply chain and pricing strategies of companies and bring transparency in transactions. The combining effect of both would trigger in formalizing various unorganized sectors of the economy.

Digitalization:

The finance minister mentioned TEC (Transform, Energize and Clean) to be the main agenda of the budget. But we must notice the hidden ‘H’ in it. TECH would be an instrument for delivering the TEC agenda. In his speech, the minister used the word ‘data’ (in relation to data mining or analysis) four times, which would probably be the highest since the budget ritual. The government is using data mining and analytics tools for understanding the patterns and trends of data collected post demonetization. GST would expose complete transactions and help government to check veracity of all transactions.

If the combined effect of formalization, demonetization, digitization, big data analytics and GST lead to a well organized, cashless and transparent system, further reforms in direct taxes cannot be ignored. It may include direct tax code (DTC) and taxing agricultural income of well off farmers (since government is planning to double farmers’ income in 5 years) or banking transaction tax (BTT).

FYI: Taxing well off farmers was proposed in Economic Survey 2017-18. Arthakranti Pratishthan (the think tank behind the idea of demonetization) also proposed BTT.

Now, without beating around the bush let us head to selected announcements of selected sectors to relate these themes and give justice to the title.

Agriculture:

Various programs like contract farming, regulated mandis on electronic platform (e-NAM), computerisation and integration of all Primary Agriculture Credit Societies (PACS) with the Core Banking System of District Central Cooperative Banks, etc. will be a starting point of ‘formalizing’ and ‘digitizing’ agricultural sector.

Under contract farming, farmers will produce and sell their harvest as per the terms of contract (rate, quantity, quality, delivery, etc.) to the buyers. Buyers are generally institutional buyers like corporates (e.g. HUL, Marico, etc.) or co-operatives. Thus organisations will buy raw materials (food grains, vegetables, fruits, etc.) directly from farmers by avoiding middlemen. It becomes win-win situation for both farmers and buyers. However, enabling these systems and setting up infrastructure would take a few years.

These measures would introduce farmers to direct market and corporates lowering the role of cooperatives gradually. I suspect that the government is preparing ground to merge cooperative banks and societies / privatize them and slowly put up the shutters permanently. Since three years are required for abovementioned computerization and five years to double the farmers’ income (as promised by the finance minister), cooperatives era could end after five to seven years.

Transport:

Transport has derived demand. Businesses need transport for their supply chain management and individuals need it for daily commute and tourism. This budget could be the best budget for transport sector due to several reasons.

Railways –

  • Due to various reasons passenger fare hikes are not made regularly leading to higher freight fares. This results in loss of freight traffic to roadways leading to losses of railways, lower investments and poor quality of services. That is the reason Mr Suresh Prabhu (rail minister) is constantly tapping various unconventional revenue sources.

Remember a recent news? Railway stations with less traffic to be rented for marriage functions!

  • This year, a multi modal approach was proposed to provide end to end solution to businesses.

Remember – IRCTC books flights as well as hotels right now! What would be the future of ‘multi modal’ after listing? Something big.

  • Mr Suresh Prabhu was specially appointed to revamp railways. He delegated all his responsibilities after appointment. In the last railway budget, he proposed Rail Development Authority to regulate railways. This year railway budget was merged and listing of IRCTC, IRFC and IRCON was proposed. The next step could be dissolving rail ministry with the transport ministry.

Airways –

  • Budget proposed modernization of airports, increase regional connectivity and monetizing 55,000 acres airport authorities’ land. This land would be used for multiple purposes viz. shopping malls, commercial hubs and most importantly; warehouses.

Water and Road –

  • The pace at which Mr Nitin Gadkari (transport minister) is constructing highways gives us a fair idea about the regional road connectivity after a couple of years. Proposed coastal roads, modernization of ports and developing inland waterways is the foundation of future logistical management.

Combined power –

  • Developing all means of transport and leveraging advantages of each route could optimize traffic. Current burden on roadways for transportation would get distributed and reduce traffic on roads leading to low maintenance costs, quick displacement and better roads. This would also help in reducing pollution and thereby carbon footprint.
  • The integrated benefits would lead to improved commute of people, goods and services and culminate in smooth launch of GST.

Education:

This sector is quiet disappointed with the current budget (and may be for many budgets as of now) since excessive capitalism and centralization veils the structural problems of education sector. Mr Jaitley said, “Good quality institutions would be enabled to have greater administrative and academic autonomy.  Colleges will be identified based on accreditation and ranking, and given autonomous status.” Delhi University Teachers Association (DUTA) said in a statement, “It is absolutely clear that the Government is trying to peddle the idea that the quality of education will only improve by letting educational structures and contents be determined by market forces. It is neither interested in addressing the real issues that ail education, specifically higher education, nor sensitive to the inequalising effect of such a move.” The statement considered autonomy as “to incentivise commercialisation in the form of self-financing”.

Remember? : Budget 2016-17 proposed 20 world class universities in India.

FYI: Niti Aayog in an internal statement regarding draft UGC regulations recommended ‘autonomy’. Also, HRD ministry finalized 10 public and 10 private universities for autonomy in January 2017.

It is true that an autonomous institute in India performs well as compared to other institutes. But, how long we must depend on autonomy as the sole criteria to improve the quality of education? Autonomy as an exception is accepted, but it should not become a policy tool. Autonomy leads to discrimination as most of the students are devoid of quality education because very few (very rich or very smart) students get admitted to autonomous institutes. Situation would be quite paradoxical to what Mr Jaitley said in opening paragraph of ‘Youth’ theme in the budget. He said, “Quality education will energise our youth. In the words of Swami Vivekananda, “The education which does not help the common mass of people to equip themselves for the struggle for life ………… is it worth the name?”

Final Take:

You will realize that most announcements made in the budget are focussed around GST. It is the trellis of economic growth and this budget readies us for it.

The budget was welcomed whole heartedly across the nation by everyone. Some said that it had more hits than misses. Some said that it was nice as there were no surprises. Words like ‘balanced’ and ‘long term’ were most associated with this budget.

Budget is a game of numbers and emotions. Like every other model, it comes with its own set of limitations. While Mr. Jaitley and his team have skilfully walked the tight rope; primary necessities like health, education and environment remain unaddressed behind the greed of economic development.

 – Swapnil Karkare

(Photo Courtesy: https://pixabay.com/en/coins-calculator-budget-1015125/)

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