The Finance minister has commendably ensured the right balance between maintaining fiscal discipline and growth measures, giving impetus to the agricultural sector and rural population on the one hand and by soothing the nerves of billion Indians post demonetization with tax and infrastructure reforms on the other. The reduction in personal tax rates will help increase consumption spend in the economy. The reduction of interest rates should aid this too.
The focus on the Agriculture and Rural sector is a welcome and necessary move. Farmers will benefit from the increase in agricultural credit to INR 10 lakh Crores. This high allocation will also give a fillip to the various ancillary industries and sectors supporting agriculture. Increasing the coverage of the Fasal Bima Yojana from 30% of cropped area, to 40% and 50% over the next two years will reduce income uncertainty of farmers. Moves such as augmenting the Long Term Irrigation Fund by 100% and increasing the coverage of the e-National Agricultural Markets will improve the infrastructure of the sector. Key reforms that can bring about significant structural change include the model law on contract farming and the move to urge States to de-notify perishables from the APMC.
In the Infrastructure segment the finance minister has ensured higher investment in the affordable housing segment by allotting it the infrastructure status and announcing key changes to the affordable housing scheme. The steps taken with respect to enhancing Railways, Roads and Clean Energy has highlighted the Government’s focus on infrastructure. Reduction in tax for the MSME sector will make them more competitive and promote employment and skilled labour.
If we consider the Economy as a whole, digitisation, accelerated by demonetization has got a further boost in the Budget. Also, simplifying tax rules and rewarding tax complaint citizens would increase the tax base. Implementation of GST in the coming year should create the long awaited level-playing field. Further easing of FDI rules will hopefully increase investment flows. With these initiatives India is on track to achieving the projected GDP growth around 7% in FY 17-18.