How I see this Budget (Part1)

It has been said that there aren't big bang reforms in this budget. The point here is, we are living in a democracy and in a democracy government's future (parliamentary and assembly elections) is dependent upon majority. In India, this majority is formed by middle and lower class people. And they must be taken into account while formulating budget. Subsidies can't be wiped out in one go without building institutions to streamline distribution of subsidies. And institution building takes time. JAM (Jan Dhan, Aadhar and Mobile)  as coined in Economic survey as best tool for limiting the leakage in subsidy will take time to be resilient and successful.

Tax benefits can't be provided leniently without compromising with government revenue (many expecting tax limit to increase to 3 lacs). At the same time, government needs more fund to invest in infrastructure and minimize deficit. But still, government has given hint of following direction of fiscal expansion by reducing fiscal deficit to 3% by next three years instead to 2 years.

Now looking at the measures announced:

1. Ease of doing business

• Bankruptcy laws help resolving insolvency (one measure of easing of doing business)
• Other measuring units are getting electricity, registering property, getting credit, enforcing contracts, paying taxes, protection of minority shareholders, dealing with construction permits. Improvement in these require more of governance reforms rather than budgetary reforms
• Few of the governance measures announced includes encouraging compliance and dispute resolution, simplifying tax procedure and implementing recommendations of TARC (Tax Administrative Reforms Commission)

2. Agriculture

• In urgent need of public investment towards capital building like irrigation, there is also growing demand of making a national market for agriculture products. Both these need has been addressed in this budget
• 25000 crore fund to Rural Infrastructure Development Bank, 5300 crore to Micro Irrigation Programme, watershed development and PMKSY (Pradhan Mantri Krishi Sichai Yojana)
• Farmer's credit to the tune of 8.5lakh crore

3. Infrastructure

• Infrastructure bottleneck is due to lack of funds, non viability and litigants in PPP projects, delay in land acquisition
• Funds problem has been tried to solve through 70,000 crore additional fund to Infrastructure from Union government, tax free bonds, and revitalizing the PPP projects with government bearing maximum risk
• To improve the functioning of public sector ports; they will be encouraged to come under Companies Act.
• Emphasized Research through Atal Innovation Mission with 150 crore to foster culture of innovation in development of infrastructure.

4. Financial Sector

• Indian financial sector that enable the companies and developmental organizations to raise funds for investment and infrastructure building and opportunity for investors has many shortcomings (insider trading,
• Forward Market Commission (which looks after commodity trading) is proposed to be merged with SEBI (can be said to be moving towards one uniform regulator)
• For a very long time now, economists have been arguing in favour of an independent debt management office, which in the Indian discourse is called " National treasury management agency" or debt management agency, so that RBI can be relieved of the burden of being the Centre's investment banker. And Public debt management agency being formed is one of the recommendation of IFC (given by  Financial Sector Legislative Reform Commission)
• PJ Nayak Committee has recommended Banks Board Bureau for appointment of chairman to PSU banks to ease them off government controls. This has been approved of in new budget
• Gold imports has been a major concern since last two to three years for India; to case off gold monetization has been attempted through Sovereign Gold Bond (equal to holding gold) and Indigenous gold coin with Ashok Chakra

5. Industries

• At present, India has seen a surge in entrepreneurial activity across the sectors. These activities bring innovation in industry and need to be promoted. Indian democracy can be best justified if it enable its weakest individual (financially)to dream of becoming a millionaire by just business. And establishment of Mudra bank with initial capitalization of 20,000 crore to finance micro-finance firms  who lend to small units.
• Regarding the high class educated entrepreneurs willing to start in technology related business, SETU incubation programme  has been launched with funds coming through NITI.
• Regarding the big corporate houses, corporate tax will be reduced to 25% over four years (nothing in this year) with end to all the exemptions phase wise (exemptions are responsible for reducing effective tax). It is believed that this will boost investment; but when already companies are sitting on pile of cash worth 8-9 lacs crore and not investing, this justification seems questionable.