‘Budget impact on economic policy is waning’

The impact of the Budget on economic policy has been coming down over the years as much of what gives impetus to the economy is being done outside the purview of the Budget.

R Anand, a chartered accountant and special advisor, Ernst & Young, addressing students of IIM Trichy and other institutions, as part of a panel discussion organised by BusinessLine and BL on Campus on the Union Budget 2017 held on the campus, said that spending is shifting to the states and panchayats and they are dealing with large sums of money which is driving the economy.

Double focus Anand said that unlike earlier budgets, this one focused both on generation and distribution of resources. “It is important to go through the implementation report of the Budget. This was introduced as part of the Budget in 1998 and gives a fair idea on the impact of the Budget,” he said. Last year, the government said 109 projects were to be implemented and it has completed 48 and only three to four projects were yet to start. Apart from the Union Budget, people should also be equally aware of their own State Budget. The Budget, he said, expects to drive consumption by putting more money in the hands of consumer and this would trigger the economic cycle of growth. However, there would be a time lag for this, he pointed out.

Focus areas Raghuvir Srinivasan, Senior Associate Editor, BusinessLine , who moderated the discussion, said the current budget stands on four legs – focus on infrastructure, social sector, reforms and a conservative fiscal policy. He spoke about how investment in infrastructure would provide more impetus to growth through public investment, the reforms attempted in electoral funding, how technology is being leveraged with the focus on a digital economy and how despite increased public spending the fiscal deficit target had been adhered to.

He said that the budgeted net borrowings of the government for 2017-18 has come down from ₹4.25 lakh crore to ₹3.48 lakh crore . “The government is giving space to private borrowers,” he added, indicating that this could spur investment in the future.

To spur growth Agreeing with Anand’s comments on the increase in spend induced by the current budget, Rani Muralidharan, also a CA and owner of an MSME in Tiruchi, GK Sons Engineering Enterprises Ltd, was optimistic that in the next three years, the economy would be robust and creating more jobs. She said that the current budget has rightly focused on agriculture as the spending starts primarily from this sector.

As an entrepreneur with onground experience, she pointed out that the reduction in corporate tax from 30 per cent to 25 per cent serves little purpose to the SMEs because it is not so much the tax cut but the ease of access to funding that poses a major challenge. She suggested that a subsidy of 2-3 per cent in the borrowing interest rate would help the SME sector significantly.

Limited role of govt G Sethu, who heads the finance and accounting department of IIM Trichy, and a panellist, said, “If the economy has to do well, the market sector also has to do well as the government role today is minimum.”

Sethu said that it is unlikely that a ₹2.7 trillion capital expenditure projected in the Budget can stimulate a country with a ₹168 trillion GDP.

“The bulk of the investment has to happen outside of government. The Budget can at best be only a catalyst. The Finance Minister has to be a master fund manager and the citizens are prepared to pay his fees through taxes,” he said and added that more focus should be laid on the agricultural sector and putting money in the hands of rural people through subsidies and direct transfer of benefits.

Abhishek Totawar, Chairperson, Placement and External Relations, IIM Trichy, said the panel discussion served as a learning medium for the students as they got to interact with professionals from diverse sectors and understand their viewpoint on the Budget. Mrinal M, External Relations Secretary, IIM Trichy, proposed a vote of thanks.

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