Finance minister Arun Jaitley speaks about India’s progress in the past few years, and its future challenges, as he presents Budget 2017-18 in Lok Sabha
On this auspicious day of Vasant Panchami, I rise to present the Budget for 2017-18. Spring is a season of optimism. I extend my warm greetings to everyone on this occasion.
Our Government was elected amidst huge expectations of the people. The underlying theme of countless expectations was good governance.
In the last two and a half years, it has been our mission to bring a Transformative Shift in the way our country is governed. We have moved from a discretionary administration to a policy and system based administration; from favouritism to transparency and objectivity in decision making; from blanket and loose entitlements to targeted delivery; and from informal economy to formal economy.
I am presenting this Budget when the world economy faces considerable uncertainty, in the aftermath of major economic and political developments during the last one year. Nevertheless, the International Monetary Fund (IMF) estimates that world GDP will grow by 3.1 per cent in 2016 and 3.4 per cent in 2017. The advanced economies are expected to increase their growth from 1.6 per cent to 1.9 per cent and the emerging economies from 4.1 per cent to 4.5 per cent.
There are, however, three major challenges for emerging economies.
First, the current monetary policy stance of the US Federal Reserve, to increase the policy rates more than once in 2017, may lead to lower capital inflows and higher outflows from the emerging economies.
Second, the uncertainty around commodity prices, especially that of crude oil, has implications for the fiscal situation of emerging economies. It is however expected that increase, if any, in oil prices would get tempered by the quick response from producers of shale gas and oil. This would have a sobering impact on prices of crude and petroleum.
Third, in several parts of the world, there are signs of increasing retreat from globalisation of goods, services, and people, as pressures for protectionism are building up. These developments have the potential to affect exports from a number of emerging markets, including India.
Amidst all these developments, India stands out as a bright spot in the world economic landscape. India’s macro-economic stability continues to be the foundation of economic success.
The Government has also continued on the steady path of fiscal consolidation, without compromising on the public investment requirements of the economy. Externally, the economy successfully weathered a number of shocks, the redemption of FCNR deposits, volatility from the US elections and the Fed rate hike. According to IMF forecast, India is expected to be one of the fastest growing major economies in 2017.
A number of global reports and assessments, over the last two years, have shown that India has considerably improved its policies, practices and economic profile. These are reflected in Doing Business Report of the World Bank; World Investment Report 2016 of UNCTAD; and several other Reports. India has become the sixth largest manufacturing country in the world, up from ninth previously. We are seen as an engine of global growth.
In the last one year, our country has witnessed historic and impactful economic reforms and policy making. In fact, India was one of the very few economies undertaking transformational reforms. There were two tectonic policy initiatives, namely, passage of the Constitution Amendment Bill for GST and the progress for its implementation; and demonetization of high denomination bank notes. The advantages of GST for our economy in terms of spurring growth, competitiveness, indirect tax simplification and greater transparency have already been extensively discussed in both Houses of Parliament.
Demonetization of high denomination bank notes was in continuation of a series of measures taken by our Government during the last two years. It is a bold and decisive measure. For several decades, tax evasion for many has become a way of life. This compromises the larger public interest and creates unjust enrichment in favour of the tax evader, to the detriment of the poor and deprived. This has bred a parallel economy which is unacceptable for an inclusive society.
Demonetization seeks to create a new ‘normal’ wherein the GDP would be bigger, cleaner and real. This exercise is part of our Government’s resolve to eliminate corruption, black money, counterfeit currency and terror funding.
Like all reforms, this measure is obviously disruptive, as it seeks to change the retrograde status quo. Drop in economic activity, if any, on account of the currency squeeze during the remonetization period is expected to have only a transient impact on the economy. I am reminded here of what the Father of the Nation, Mahatma Gandhi, had said: “A right cause never fails”.
Demonetization has strong potential to generate long-term benefits in terms of reduced corruption, greater digitisation of the economy, increased flow of financial savings and greater formalisation of the economy, all of which would eventually lead to higher GDP growth and tax revenues. Demonetization helps to transfer resources from the tax evaders to the Government, which can use these resources for the welfare of the poor and the deprived.
We are at an important turning point in the path of our growth and development.
Iss mod pe ghabra ke
na tham jaiye aap
Jo baat nayi hai usse apnaiye aap
Darte hain nayi raah pe
kyun chalne se
Hum aage-aage chalte hain
The Budget for 2017-18 contains three major reforms.
First, the presentation of the Budget has been advanced to 1st February to enable the Parliament to avoid a Vote on Account and pass a single Appropriation Bill for 2017-18, before the close of the current financial year.
Second, the merger of the Railways Budget with the General Budget is a historic step.
Third, we have done away with the plan and non-plan classification of expenditure. This will give us a holistic view of allocations for sectors and ministries. This would facilitate optimal allocation of resources.
Our agenda for the next year is: “Transform, Energise and Clean India”, that is, TEC India. This agenda of TEC India seeks to :
Transform the quality of governance and quality of life of our people;
Energise various sections of society, especially the youth and the vulnerable, and enable them to unleash their true potential; and
Clean the country from the evils of corruption, black money and non-transparent political funding.
I propose to present my Budget proposals under ten distinct themes to foster this broad agenda. The themes are :
Farmers: for whom we have committed to double the income in 5 years;
Rural Population: providing employment and basic infrastructure;
Youth: energising them through education, skills and jobs;
Poor and the Underprivileged: strengthening the systems of social security, health care and affordable housing;
Infrastructure: for efficiency, productivity and quality of life;
Financial Sector: growth and stability through stronger institutions;
Digital Economy: for speed, accountability and transparency;
Public Service: effective governance and efficient service delivery through people’s participation;
Prudent Fiscal Management: to ensure optimal deployment of resources and preserve fiscal stability; andTax Administration: honouring the honest.
The Indian farmer has once again shown his commitment and resilience in the current year. The total area sown under kharif and rabi seasons are higher than the previous year. With a better monsoon, agriculture is expected to grow at 4.1 per cent in the current year.
About 40 per cent of the small and marginal farmers avail credit from the cooperative structure. The Primary Agriculture Credit Societies (PACS) act as the front end for loan disbursements. We will support NABARD for computerisation and integration of all 63,000 functional PACS with the Core Banking System of District Central Cooperative Banks. This will be done in 3 years at an estimated cost of Rs 1,900 crore, with financial participation from State Governments. This will ensure seamless flow of credit to small and marginal farmers.
I now turn to the Rural Sector, which was so dear to the heart of Mahatma Gandhi.
Our Government has made a conscious effort to reorient MGNREGA to support our resolve to double farmers’ income. While providing at least 100 days employment to every rural household, MGNREGA should create productive assets to improve farm productivity and incomes. The target of 5 lakh farm ponds and 10 lakh compost pits announced in the last Budget from MGNREGA funds will be fully achieved. In fact, against 5 lakh farm ponds, it is expected that about 10 lakh farm ponds would be completed by March 2017. During 2017-18, another 5 lakh farm ponds will be taken up. This single measure will contribute greatly to drought proofing of gram panchayats.
The focus of TEC India agenda in this sector is on building stable and stronger institutions. We will continue with our reform agenda with several new measures.
Our Government has already undertaken substantive reforms in FDI policy in the last two years. More than 90 per cent of the total FDI inflows are now through the automatic route. We have decided to abolish the FIPB in 2017-18. A roadmap for the same will be announced in the next few months.
Cyber security is critical for safeguarding the integrity and stability of our financial sector. A Computer Emergency Response Team for our Financial Sector (CERT-Fin) will be established. This entity will work in close coordination with all financial sector regulators and other stakeholders.
Promotion of a digital economy is an integral part of Government’s strategy to clean the system and weed out corruption and black money. It has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system. This, in turn, is expected to energise private investment in the country through lower cost of credit. India is now on the cusp of a massive digital revolution.
A shift to digital payments has huge benefits for the common man. The earlier initiative of our Government to promote financial inclusion and the JAM trinity were important precursors to our current push for digital transactions.
After the demonetization, the preliminary analysis of data received in respect of deposits made by people in old currency presents a revealing picture. During the period 8th November to 30th December 2016, deposits between Rs 2 lakh and Rs 80 lakh were made in about 1.09 crore accounts with an average deposit size of Rs 5.03 lakh. Deposits of more than 80 lakh were made in 1.48 lakh accounts with average deposit size of Rs 3.31 crore. This data mining will help us immensely in expanding the tax net as well as increasing the revenues, which was one of the objectives of demonetization.
One of the main priorities of our Government is to eliminate the black money component from the economy. We are committed to make our taxation rates more reasonable, our tax administration more fair and expand the tax base in the country. This approach will change the colour of money.
India is the world’s largest democracy. In accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive will be Rs 2,000 from one person. Political parties will be entitled to receive donations by cheque or digital mode from their donors.
I have outlined the Budget proposals under our overarching agenda: “Transform, Energise and Clean India”. Our emphasis will now be on implementing all these proposals for the benefit of the farmers, the poor and the underprivileged sections of our society.
It is said: “When my aim is right, when my goal is in sight, the winds favour me and I fly”. There is no other day, which is more appropriate for this, than today.
With these words I commend the Budget to the House.