Budget 2017: Achche Din- Still Elusive?

Salim Desai
Sunday, January 29, 2017

This year, the government is changing the British-era legacy by presenting budget on February 1, instead of on the last day of February, for faster completion of formalities of budget exercise and policy implementation. Further, for the first time there will be no separate railway budget as the same will be integrated with the general budget.

This is fourth and third full-fledged budget under the current regime, still Achche din are distant, as was promised, there is big anxiety among common people as well as different sectors across the economy.

Finance Minister Arun Jaitley has mammoth task in budget, as due to sudden post demonetization, there was near crisis situation in the economy due to various aspects of flawed implementation.

Finance Minister has challenging priority task of reversing the sudden economic down turn while continue the long awaited reforms and fulfilling common people aspirations.

Before demonization, Indian economy was bright spot in global scenario with GDP growth about 7.6%. But due to sudden demonization, cancelling 86% of the currency, GDP is expected to be declining to 6.6% (IMF Estimate) and will be around 7.2% in next year. Some private institutions have more pessimistic predictions.

On the backdrop of demonetization more challenges are surfaced apart from usual challenges which are:

•According one estimate, in the period of demonetization micro industries suffered 34% job losses and 50% of revenue.

•Indian auto industry has registered around 18.66% decline in Dec-16 sales, which is the worst in last 16 years.

•As per RBI, bank credit growth for the month of December is the slowest in last 16 years indicating that businesses have not enough activities requiring bank money.

•Another major disappointment may be faced as Govt. couldn’t get estimated “Windfall Gain” out of painful demonetization exercise.

As per estimates, Govt. was expecting around Rupees 3 to 4 lakh crores windfall profit, which could have been real booster for economy. But now, it is estimated to be much lower compelling the Finance Minister to redo his calculations.

Above challenges thrown by demonetization, which hopefully are short term, there are already legacy issues, affecting the growth which has to be addressed by the Finance Minister.

•Non-Performing Assets(NPA)and under capitalization of the banks: As per RBI estimates in June- 16, Gross NPA stood around whopping Rs.6 lacs crores affecting banks.

•Ease of doing business: Even after so much of marketing, the ground reality in ease of business is not changed.

•Consistency in tax regime: Still General Anti Avoidance Rule(GAAR)issue is not resolved amicably and the looming uncertainty as to recent flip-flop by Central Board of Direct Taxes (CBDT) on Foreign Portfolio policy (FPI).•How to increase collection of taxes without hurting populist sentiments.

Economic development is an ultimate objective of any govt. which will help in sustainable good standard of living for its citizens, full employment and better social conditions.

Govt. expenditure is the foremost catalyst of economic development of any country. This can be done through development, social and infrastructure projects as those will have cascading effects on development process. It’s good that the govt. has realized importance of scheme like MNREGA which it had addressed before like digging pit.

The robust tax collections as of Dec-16 is very positive sign indicating demonetization effects would be short term and will have more funds at its disposal for developmental projects.

Further, private investments, consumption and exports are also fundamental to economic growth. For quite a long time, private investment cycle is not picking up and exports are improving marginally due to global economic conditions.

India has always been a good consumption story due to huge population and to boost economy, Finance Minister is expected to adopt this route to stimulate consumption, propelling development.

It means he has to place more disposable income in the hands of people and thus is expected to announce number of decisions in coming budget like:

•Reduction of income tax for individuals
•Rationalization of tax rates and slabs
•Reduction of corporate income tax for promoting investment cycle and entrepreneurship
•Making way for further reduction of interest rates by containing fiscal deficit.
•Offering rebate for interest paid on housing loans
•Sops for first time home buyers
•More outlay for MNREGA
•Incentives for manufacturing sector
•More outlay for Skill India/ Make In India
•Boost for rural economy
•Widening tax net.
•Clarity on already announced schemes (PMAY, GST)

Finally, Achche din is synonymous with development of the country. Before economy takes downturn, Finance Minister is expected to present transforming pro development budget which will envision for sustainable and equitable growth for all citizens, so that the Achche din will not be a distant dream.

Salim Desai is Chief Financial Officer (CFO) with Al Razzi Holding Co KSC. He holds MBA, CMA, CIPA and also passed CPA. He is an expertise in Finance analysis and Investments and passionate educationist.
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Express your comment on this article

 
Hary Paul
Posted on Thursday, March 23, 2017

BJP's massive election victory in UP is ample proof that it is poised for a massive comeback in the next general election after 2 yrs. It is clear that demonetization and other things had no impact on BJP's vote bank.
(Those who can not bear BJP's massive victory will try to find fault in voting machines etc.)
Yes, there are negative sides as well but overall congress and communist backed central govt. had virtually destroyed our economy over the last 65 years.
PM Narendra Modi is an honest and capable person. We expect to see a real push forward for our economy in the next coming years. Then only we can judge him performance.
For"Acche Din Ayenge" - we need to change ourselves first. Imagine govt. has to ask people to make and use proper toilet in this 21st centruy. Tax avoidance and corruption are rampant. Who are those corrupt people? It is mostly ourselves and we are to blame for all these. Let us all work to make our contry great once again.
Jai Hind and God bless India.

Dr.P.Kumar
Posted on Friday, February 3, 2017

I don't understand much about economics so 'am not an expert to comment about the present budget.But regarding the transparency of political party funding fm minister has stated that'political parties can now receive only Rs 2000 as donation in cash from one source,and any donation above Rs 2,000, parties will have to disclose the identity of the donor,..what if I want to donate Rupees 2000 in 100 receipts=200000 INR and keep my identity undisclosed!! no wonder the BJP recorded the highest income of Rs 970.43 crore among the national parties after MODI became PM! jay ho!!

HINDI
Posted on Thursday, February 2, 2017

BJP will be ruling this time is only for last time of Indian History non of them will Vote them,BJP name will be wash out from the Indian History,just BJP is helping rich people like how they helped to JIO Sim,black money to white money,Vijay Malaya,Janardhan Reddy,Yedurappa Former CM in mines scam,mr FM stop making fool for Citizens ok.,

Ajeem
Posted on Wednesday, February 1, 2017

This BJP goverment is supporting rich people like ambani and adani but poor people has to suffer, due to demonetization nearly 200 poor people had died no black money found but still lot of stupid bakth still supporting this FEKU.

Ajay Auti
Posted on Monday, January 30, 2017

Very well and balanced view. Its unfortunate that this govt has failed the common man in India. Its meant for the rich, for the rich and by the Super-rich.

Those who voted this PM with much fanfare and hope have now really seeing the real face and intent. THey are just busy in dividing the country on caste and religious lines. Its being ruled by the upper caste brahminists who had no role in the independence of the country from the brits and today they pose as if they are the only nationalists. What a shame.

Also how can a lawyer without a finance background run and ecomonomy of such a vibrant country as India. When we had the likes of Manmohan Singh and Chidambaram, who understood finance and economy, we had a great GDP growth. This current finance minister will lead us to dooms day. Thats what it looks like,. Lets wait for his budget to see where we will be heading

Tanveer M Khot
Posted on Monday, January 30, 2017

Dear Mr. Raj,
There are crores of people in India who are below the basic taxable Income. Majority of they even have no knowledge on what has actually happened. Millions of people depend on daily wages for meeting their livelihood and no money at the end of the day means no normal life for them. They are affected now because of cash crunch in the country. It is just not possible asking someone to board the banking system without providing enough awareness, training and enough time. The Govt. its self is not firm whether they have taken the step to curb corruption or to just to promote cashless economy. Think about the larger picture in India- The literacy rate, the poverty rate, the reach of banking system some places don't have banking system. think about the rural India (Villages). its easy to comment unless one has gone through the pain.

Mr. Desai is talking on the short term hassles due to flawed Implementation if you read it carefully.

Mufeed Bijle
Posted on Monday, January 30, 2017

Very nice article. Salim bhai. goodluck

Mohammed Shafi Alware
Posted on Monday, January 30, 2017

Precise article Salim bhai.
Ache din still far away.
The government put itself in a difficult task to bring back GDP level.

Raj
Posted on Monday, January 30, 2017

Sorry to say that it is a good for nothing article. You dont have any solid comment on the budget. Nobody in the world can asses the pros and cons of demonetization within a month. But you proclaiming as an economist evaluating this long term objectve demonetization within one month time! What a joke!
And also you dont have any solid suggestions to the new budget. All your points are teh same repeating every year. nothing new in it.

Nasrullah
Posted on Monday, January 30, 2017

You are absolutely right sir the ruling party paranoid anxiety has convinced themselves & whole nation literally in hell. I strongly believe that it's next to impossible to expect U turn in the Indian economy by such bluff masters not economist indeed.

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