Budget in the Press

Newsclick Report

Finance minister, Arun Jaitley’s budget brought out an array of opinion and commentaries on it.

Newsclick presents a compilation of views on the budget from various analysts.

Prakash Karat

The Budget provides no succour to the millions of people who have suffered the consequences of

demonetisation. The large workforce in the informal sector, the migrant labour, the small

shopkeepers and traders, the women who kept tiny savings in cash and the small farmers and

agricultural workers — all of them were hit with the loss of livelihood, wages and savings. There is

economic slowdown which got exacerbated by the demonetisation measure. All indicators show

that there is a fall in output in all sectors and contraction of demand.

But the Budget has refused to acknowledge this reality and does not take any concrete measures to

at least repair the damage done. What was required in such a situation was a substantial increase in

public expenditure. This would have meant not sticking to any rigid fiscal limits. By setting the fiscal

deficit at 3.2 per cent for the next year, this is a contractionary budget. The total size of the Budget

has come down from 13.36 per cent of the GDP last year (Revised Estimates) to 12.74 per cent of

GDP this year. The fiscal deficit target has been achieved through expenditure reduction.

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Sitaram Yechury

At the outset, this year’s budgetary exercise suffers from a major drawback. Normally, the Budget

relies on the database of the Indian economy which comes in after the third quarter statistics are

tabulated. This usually comes in by the beginning of February for the October-December quarter.

This is an important quarter under normal circumstances as it reflects the impact of the monsoons

and the output of the agricultural sector, the economic backbone for the vast majority of our people.

This year, this quarter is of additional importance for the effect of demonetisation. International

agencies and our own economic survey are projecting a significant fall in our growth rate. By

advancing the Budget to February 1, the database is essentially confined to the first two quarters of

the fiscal year. And, hence, both the calculations and the projections can be seriously flawed.

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Prabhat Patnaik

The Budget estimates, which have generally become somewhat suspect of late, are particularly

meaningless in the case of the 2017-18 Budget for two obvious reasons: first, the early presentation

of the Budget means the availability of that much less information for the current year, upon which

the Budget is based; and second, the draconian demonetisation that has occurred, while certain to

pull down the GDP growth rate (even the Economic Survey concedes that), makes any precise

prediction impossible. Let us therefore look at the broad strategy of the Budget rather going into its

numbers in any detail.

One obvious thing that stands out here is that while the ratio of the central government’s tax

revenue to the GDP is broadly expected to remain unchanged (the chief economic adviser has said

so explicitly to a group of TV journalists), the ratio of the fiscal deficit to the GDP is to be kept

unchanged (to maintain India’s credit rating in the eyes of global finance). This means that the

central government has decided to keep its expenditure relative to GDP unchanged. Such an act of

“fiscal prudence”, which constitutes the cornerstone of the government’s budgetary strategy, is

staggering in its witlessness. It serves to compound further the folly of demonetisation.

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Jayati Ghosh

The most striking thing about Arun Jaitley’s Budget presentation for 2017-18 is just how un-striking it

is. A lot was expected from this Budget, and it is largely the government’s own fault that the

expectations were so many and so contradictory. In the event, the finance minister has presented a

very ‘ordinary’ Budget, which is unlikely to satisfy most people who recognise that these are

definitely not ‘ordinary’ economic times.

First, this Budget comes directly in the wake of a demonetisation followed by a painfully slow and

inadequate remonetisation, which has dealt a body blow to the informal sector as well as formal

economic activity. The growth rate is decelerating, and even the finance ministry’s own Economic

Survey recognises that demonetisation’s effects in the current year cannot be fully estimated yet

and may well linger on into the next financial year. If ever there were a case for a more expansionary

fiscal stance to revive demand in the economy, it would be now. But the finance minister has chosen

to stick to his self-declared fiscal deficit target of 3.2% of GDP! Of course, his estimate is based on

huge increases in the revenue projections (more than a Rs 200,000 crore increase in tax revenues,

out of which as much as Rs 88,000 crore is projected to come out of increases in personal income

taxes) which are unlikely to be realised. So it may well be that the actual deficit will be larger if these

higher revenues are not realised. Still, in the current context, with all the global economic headwinds

coming from the new US dispensation and other forces, such fiscal rectitude is surprising to say the

least.

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Mohan Guruswamy

The presentation of the budget is a much-awaited annual ritual. It was very important in the days of

license raj when the government exercised its discretion or didn’t show it to favor some and punish

others.For instance it was in one such budget that the rates for purified terephthalic acid (PTA) was reduced

and dimethyl terephtalate (DMT) increased to determine the outcome of the most fiercely fought

corporate war in India’s history between two top manufacturers of polyester filament yarn.

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Thomas Isaac

What should a budget be like in the times of demonetisation? Never like the one presented by

Union Finance Minister Arun Jaitley in the Parliament Wednesday. Instead of providing fiscal

stimulus to the economy, he presented a contradictory budget.

He gave the impression that by the time the Union Budget of 2017-18 would become operational,

demonetisation would be well behind us. But will re-monetisation resurrect the more than 100

people who died either standing in the queue or by committing suicide in their haplessness? Will it

automatically reopen the lakhs of informal sector units that had to be shuttered for want of cash?

Will it be able to restore the shattered investment climate? It is a simplistic view to assume that it

would be business as usual once re-monetisation gets underway. The budget as well as the

Economic Survey has adopted an ostrich-like attitude towards the grave economic crisis the country

faces.

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