Budget Lays the Blueprint for $5 Trillion Economy

No fireworks in the budget announcement. In the run up to the budget, many analysts and pundits anticipated announcement of major structural reforms.The layman hoped to see bold reforms from a stable government. The Finance Minister shunned populism and laid a roadmap towards long term growth by announcing  a set of policy initiatives in the budget will lead our country towards achieving a $5 trillion economy. Nothing major was attempted in the tax slabs. Except making an announcement on the rationalised four labor codes, there is no other mention of any radical labor reforms. Perhaps, Modi 1.0 defined the ‘what’ – Make in India, Skill India, Digital India, Swachch Bharat, IBC, GST – and Modi 2.0 has outlined the ‘how’ on the principles of sustained reforms, consistent high performance leading to the eventual transformation of the economy. 

The government has rightly realized that education is the foundation of putting our economy on a long term growth trajectory. It has conceived the ‘Study in India’ policy to attract foreign students to pursue higher education in India. The initiative proposes to revamp school and college education with the objective of making them at par with  global standards. Most patents and innovations come from the west. India aims to move up the value chain. National Research Foundation will be set up to promote research and innovation. Though it will take years to operationalize such transformational initiatives, if executed properly, they will change the quality and course of our education system. 

Growth needs to be fueled by a set of role-ready talent pool. The budget proposes to take skill-development to the next level. From the existing coverage of 1 million youth, the budget proposes a ten-fold increase in coverage of apprentices to 10 million youth through the Pradhan Mantri Kaushal Vikas Yojana (PMKVY). What’s conspicuous and futuristic is the inclusion of language training and new-age skills like Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality (VR) and Robotics in the ambit of skill building. Though there are many other sectors which have the potential to employ a huge number of youth, they did not find a mention. At least the new age skills are high in demand as well as remuneration which would enhance not only chances of high job growth but also high wage growth. Digital India and Skill India will penetrate rural India. Under ASPIRE, 100 livelihood and technology business incubators will develop 75,000 skilled entrepreneurs in agro-rural industries which is a welcome step towards sustainable development. 

MSME and Start-ups are the real beneficiaries of this year’s budget. It’s good to see the government aiming towards greater transparency and speedy resolution. Clearance of loans upto Rs 1 crore for MSME within 59 minutes and payments through an online portal will ease the life of MSME entrepreneurs. To promote ease of living, it has been proposed to make Pan Card and Aadhaar card interchangeable in tax return filing. Connectivity infrastructure – highways, power grids, waterways, gas, regional airports – will boost job creation and spur growth. 

The budget has raised the annual turnover limit from Rs 250 crore to Rs 400 crore for corporate tax at 25% covering 99.3% of the registered enterprises. This seems to be a good move to encourage companies to grow without worrying about more tax deduction. Surprisingly, what’s there to gain by excluding the remaining 0.7% enterprises? 

FDI has been eased in aviation, media, insurance and single brand retail. The latter particularly will positively impact the lower middle class by creating job opportunities. 

Higher disinvestment target of Rs. 1,05,000 crore seems unrealistic, particularly with the recent experience of Jet Airways failing to find suitors. It is anyone’s guess that if Jet found it so difficult, what will be the case of Air India? 

On expected lines, cash withdrawal above Rs 1 crore annually will attract 2% TDS. Super rich will now be taxed on an increased slab, taking the highest slab to 42.74% taxation. The proposals around tax slabs changes have been minimal. 

Overall, the budget has tried to outline the long term goals set by the government by focussing on doing the basics right. It did not fall for the jingoism. Instead, it preferred to listen to the heart-beat of India’s political economy, without being overtly populist. The key to India’s vision of $5 trillion economy lies not in lofty announcements but in ensuring that the execution of these initiatives is done with single-minded sustained dedication and on war footing.