Editorial: Union Budget 2017-18 (without numbers!)

- Meghana Yerabati , Economics Association



The Union Budget 2017-18 has been widely followed by tax-payers, stock market players, and other important stake holders in the formal and informal sectors. There's a good reason for that. Following the large scale policy intervention in the form of demonetization of the five hundred and thousand rupee notes, and the passage of the GST bill, there was a large interest in the tax structure that would be proposed and how it would directly affect the average Indian citizen. There are also a lot of expectations on the budget and what it offers to various demographics of the country such as farmers, the youth, the rural population, the poor and the underpriviliged through redistribution. Government spending can also give a boost to the economy by giving a stimulus through public investment.

To put it simply, the Union budget is a comprehensive report of the Government's finances in which revenues from all sources and outlays on various activities are consolidated. Revenues come from direct/ indirect taxes, excise and customs duties, and PSUs. The expense side of the budget is towards multiple development and non-development expenditure. The incumbent government, one that champions the use of social media and technology to reach out to the masses, has displayed beautiful infographics on the finance ministry website to outline the major public expenditures that would affect different classes of stakeholders.

To understand the reasoning behind the break up of expenses and the targeting of the schemes towards specific stakeholders, we must understand the backdrop of the economy. This is conveyed by another important and comprehensive document called Economic Survey of India. The document is a very well-written stand-alone report which gives a broad overview of recent developments such as Brexit and Trump's win in the United States (thought not directly!), near-term issues such as Demonetization, Twin balance sheet problem, Fiscal policy of centre and states, Labour intensive employment creation, and medium term issues such as rising inequality amongst states/ rural-urban areas and (interestingly!) use of Big Data in Governance.


The last quarter saw two major structural changes in the economy through Demonetization which caused demand, supply and uncertainty shocks. While the demand and supply shocks have easened over time, the uncertainty shock can only be reduced by giving confidence to the public through tax cuts and individual welfare-enhancing tax reforms such as what we saw:

1. Existing rate of tax for individuals between Rs. 2.5- Rs 5 lakh is reduced to 5% from 10%.
2. All other categories of tax payers in subsequent brackets will get a benefit of Rs 12,500.

Boost to MSMEs as there is a proposal to reduce corporate tax for small companies with a turnover of up to Rs 50 crore to 25%. About 67 lakh companies fall in this category. 96% of companies to get this benefit. The GST is supposed to ensure tax compliance by expanding the tax net and thus increasing revenues.

Agricultural and Rural Sector

Since India is majorly an agricultural economy, the Budget also has some important provisions for the agricultural sector such as improving insurance, credit, property rights and investing highly in irrigation, R&D for agriculture and husbandry.

The government is also announcing schemes to double farmers income, increase women's participation in MNREGA to 55%, targets to bring 1 crore households out of poverty by 2019 and invests in sanitation and rural electrification schemes.


Based on the current Indian demographic, it is important to invest in the Indian youth. Therefore, the budget has invested in skill building and secondary education. It has also invested in healthcare schemes for women and children. It has also targeted to eliminate Tuberculosis by 2025. Two AIIMS will be set up in Jharkhand and Gujarat.

Energy Sector

As oil prices are expected to increase, windfall gains from the dip in oil prices is going to reduce and create pressures on government revenue. Therefore, investment in energy sector is important. A strategic policy for crude reserves will be set up and investments in energy production have been bulked up.

Fiscal Policy

Fiscal discipline has been a policy priority after the Fiscal Reform and Budgetary Management Bill was passed. Goal is to maintain low fiscal and revenue deficits at 3.2% and 1.9% respectively.

These are a few of the proposed highlights from the Budget that we bring into perspective. A key observation is the need for JAM Jan Dhan, Aadhar and Mobile- coverage universally to ensure proper implementation of various schemes. The Budget thus aims to bring redistributive justice to the poor through its many schemes. It also aims to stimulate production by improving ease of doing business and consumption with tax cuts and infrastructure spending.

For more information on Budget, do read: