Budget 2017-18 Tough or Tepid?

The jury is still out on Budget 2017-18 as experts read the fine print. While the government has earned kudos for its continued focus on fiscal consolidation and balanced and broad reform agenda, there are also narratives of discontent. 

The biggest event in India’s economic calendar 2017-18, was billed as a tightrope walk for Finance Minister Arun Jaitley. Would he walk the talk or give in to populist pressures? Presented in the backdrop of demonetisation and the high-stakes Assembly elections in five states, viz., Punjab, Goa, Uttarakhand, Uttar Pradesh and Manipur, it was a crucial budget.

By most accounts, the government managed to win laurels for its restrained pro poor, pro small businesses, pro rural with an eye on long term growth budget. What has struck a chord in the finance and business community is the admirable fiscal restraint narrative against the tide adopted by the FM. Making every rupee count is something our CFOs have to juggle with at all times. Hence, the FM’s attempts at fiscal discipline in the face of raised expectation following cash ban induced slowdown, is worth examining.

Experts point out that in the last three budgets presented by Mr Jaitely, fiscal restraint is a discernible thread. At the time of the first budget in 2014, the share of borrowings in every rupee spent by the government was 28 paise, which has been brought down to 17 paise in the last three budgets (source: howindialives. com). Traditionally, governments have been on an increasing expenditure leading to budget deficit financed by increasing borrowings path. But the FM has been trying to change the course. Notably, what is easily achievable when the economy is growing fast as there can be more tax collections is being attempted when our growth forecasts are down.

The second cause of cheer was the government’s decision to walk the transition tightrope to the biggest reform in India’s indirect tax structure, Goods and Services Tax (GST). In all probability, GST roll out would now commence on July 1.