For the first time, as a departure from the past, both the Union Budget and Rail Budget have been merged and distinction between Plan and Non-Plan expenditure have been done away with. Union Budget for FY 2017-18 is pro-poor, pro-farmer, pro-small business and pro-infra while maintaining fiscal prudence and being pro-growth. It remains true to its dictum to Transform, Energise and Clean India. It ushers India to the cusp of a digital revolution. The Budget gives further stimulus to education, skill development, healthcare and housing.
Says Ashwani Kumar, Chairman & Managing Director, Dena Bank, “This Budget is consumption and investment driven having broad focus on the key areas of Agriculture and farmers' welfare, Rural sector, social sector including healthcare, education, youth development and job creation, infrastructure, financial sector reforms, Digital Initiatives, ease of doing business, fiscal discipline, Public service and Governance and Tax reforms to reduce compliance burden.”
According to Kumar, prudent fiscal deficit target of 3.2 per cent signalled the expected Government expenditure on various schemes. The budget is well balanced since it gives impetus to long term growth and lays a credible road map of fiscal consolidation.
He says that the capital infusion of Rs.10,000 crore for recapitalisation of PSU Banks will be a morale booster in scenarios where Banks are in dire need of capital for Credit growth and Basel III compliance. Further, the deductions allowed for NPA provisions made by Banks have been increased up to 8.5 per cent of the income which will act as a breather in supplementing profitability of Banks.
Increase in agriculture credit target to an all time high of Rs 10 lakh crore for FY-2017-18 and adherence to double the farmers’ income will bring in much support and focus to the deprived agriculture and farming sector.
Kumar feels that the Budget also strongly augment the digital initiatives of the Government, targeting over 2500 crore transactions under UPI, BHIM, Aadhar Pay and other Alternate channels. Further encouraging Banks to deploy around 20 lakhs Aadhar enabled PoS is expected to revolutionise the payments eco systems in the country.
Says Melwyn Rego, Managing Director & CEO, Bank of India, “The Budget aims at introducing legislative reforms to harmonise industrial relations and provide stimulus to small industries. As a positive for the banking sector, thrust has been accorded to evolving a swifter and effective resolution mechanism. Provision for NPAs to avail tax benefits has been raised. Target under PMMY has been doubled to benefit the poor and under-privileged.”
Moreover, steps have been taken to revolutionise public service delivery and tax administration through technology. Relief has also been given to the tax payers at the lower end. “Another major takeaway is the stimulus given to affordable housing by giving it infra status and subvention benefits,” says Rego.
According to R K Gupta, Executive Director, Bank of Maharashtra, “The Budget is a positive and balanced one, following fiscal discipline along with innovation. Emphasis has been put on transformation on various segments of the economy, making the budget a truly inclusive one.”
Keeping in line with the vision of ‘Housing for All’ by 2022, a part of Pradhan Mantri Awas Yojana, the budget’s focus on the affordable housing segment will lead to significant uptake in home loan products.
The Budget also focused on several initiatives to achieve the vision of a cashless society, and “banks will continue to be a cornerstone in helping develop a financially inclusive India,” concludes Gupta.
Rana Kapoor, Managing Director & CEO, YES BANK describes the Union Budget as a truly ‘Hi-TEC’ one. “The Government has adopted bold pragmatic measures, with significant thrust on social and infra spending, affordable housing, MSME sectors, and a substantial build up in capital expenditure. Tax benefits for the common man, will further support consumption recovery,” observes Kapoor.
According to Kapoor, the commitment to a less-cash economy has got a significant leg-up through bold measures such as the issue of electoral bonds for political funding, a cap on cash transactions, and initiatives to spur digital payments in the economy.
The Transform, Energise and Clean (TEC) agenda of the budget has clear short, medium and long term outcomes to spur the economy, and importantly aid credit growth in the banking sector. Kapoor rates the Budget a resounding 9 on 10.
Anand Bagri, Head of Domestic Markets, RBL Bank sees the Budget as a forward-looking and progressive one. Infrastructure, agriculture, rural development, affordable -housing, digitisation and tax simplification were the key focus areas for the Government. The finance ministry also took the opportunity of this budget to focus on ways to increase tax compliance and attacking unaccounted money.
According to Bagri, the finance minister has done a fine balancing job on the taxes front. “The Budget has lessened both corporate and direct taxes and simplified tax rules so as to bring more people under tax net and increasing tax compliance. The Government has also initiated reforms in the funding of political parties,” he says.
On growth front, “revival of consumption cycle and higher allocation to agriculture, infrastructure, housing and rural/urban development will ease the stress on corporate sector,” he says. Pre demonisation, private investments were showing green shots and were expected to revive within a year. However, the cash crunch curbed demand temporarily and there is a fear that this could further delay on-going and fresh investments. A sustained pick up in investments is necessary as the share of private capital in GDP continues to fall. The budget has incentivised the same by announcing tax breaks and reducing corporate taxes.
Bagri concludes by saying that the finance minister has stuck to FRBM commitments. Fiscal Deficit has been pegged at 3.2 per cent and this should help interest rates to soften further.” He also expects the RBI to cut rates by 25 bps in the next policy.
BW Reporters
The author is associate editor at BW Businessworld
