On budget days, finance ministers are trapeze artists, balancing risks with rewards, audacity with caution and tempering expectation with reality. Has Arun Jaitley succeeded in this balancing act? For one, this budget is popular but not populist. The sweep of the budget is far more comprehensive than any we have seen in recent years.
Let me concentrate on four key areas:
First, macroeconomic stability: The NDA inherited a legacy of fiscal laxity. Fiscal deficit was brought down to 4.1% in 2014-15 and 3.9% in 2015-16. But instead of 3.2%, it is likely to be 3.5% in the current year. Similarly the target for 2018-19 is now projected at 3.3% than the expected 3% announced last year.
Given the fact that GST is a far reaching structural reform with unanticipated revenue outcomes, this could be an acceptable deviation even under the framework of the Fiscal Responsibility and Budget Management Committee’s (FRMB) recommendations. More important, the government has now categorically accepted the key recommendations of the FRBM committee: adopting the debt rule and to bring down the debt to GDP ratio to 40% by accepting the fiscal deficit as a key operational parameter. The danger of suggesting a trend glide path rather than absolute numbers is obvious. We cannot every now and then find a rationale to bring up the fiscal deficit and then argue that as long we are on a downward glide path, our compliance remains meaningful. Indeed, during an earlier period, the habit of a pause button or the need for a fiscal stimulus was somewhat endemic. That is why a rule-based framework with fixed numbers is always preferable. Overall there is credible evidence of both fiscal consolidation and the quality of expenditure on health, education and infrastructure, which are positive growth multipliers.
Second, agriculture has been a dominant concern. The multiple initiatives outlined in the budget include a substantial increase in the Minimum Support Price (MSP) and widening the coverage to include many other crops, which would enhance both immediate farm income and assure wider security to farmers. The NITI Aayog in consultations with state governments will put in place a foolproof mechanism to ensure that farmers are benefited. Enhancing the MSP and extending its coverage could have inflationary impact, but that can be mitigated through improved supply-side response.
Of course, the inflationary bias can constrain the options of the Monetary Policy Committee. The renewed emphasis by Operation Green through diversification of income through agro-processing sector and also emphasis on horticulture, fisheries and animal husbandry is consistent with this broad approach.
Linking Agricultural Produce Market Committee (APMCs) with eNAM would provide improved marketing and linkages. While the thrust on agriculture is understandable, this would need to be supplemented by a continued emphasis on irrigation, improving the shelf life of perishable products and linking the additional allocation on roads with assured market access. The initiative of soil testing programmes with optimum mix of fertilisers deserves greater priority. Besides no other area necessitates greater compact with states than these multiple initiatives both in their design and the implementation.
Third, health. Historically, unlike education, the per capita expenditure in the health sector was significantly below acceptable international averages. This budget does make a decisive change. The flagship national health protection schemes are designed to cover 10 crore poor and vulnerable families (500 million beneficiaries to provide coverage up to Rs 5 lakh per family). This will be the world’s biggest health insurance initiative. It brings us quite close to the concept of universal health care — missing matrix in our development strategy.
Recognising the need for adequate number of doctors, setting up 24 new government colleges and ensuring at least one medical college in every three parliamentary constituency and one government medical college in each state complements the need to provide skilled manpower and supporting infrastructure.
This will improve the affordability and quality of health care. Given the spread of tuberculosis, the allocation of Rs 600 crore for TB patients for nutritional support and cost of medicine should have been implemented much earlier. All these need calibration and wider consultations with all stakeholders over the coming months to align them to our needs and capacities.
Education: We know that while the Right to Education Act guaranteed access, the education outcomes continued to deteriorate. The absence of trained teachers and the need for a robust teacher training programme remained a dominant concern. The flawed RTE, while emphasising compulsory access and prescribing the necessary infrastructure, did little to address the issue of teacher training. The budget recognises the need to treat education holistically without segmentation from pre-nursery to Class 12 and also training of teachers through integrated B.Ed programme.
Changing the focus from access to outcomes could not be delayed further. However, revamping our education system needs more fundamental reforms. Linking skill education and pedagogic changes to align education to not the jobs of today but the jobs of tomorrow, deserves fresh thinking. For one, we do not precisely know the jobs of tomorrow. We do, however, know that the current pedagogy is unsuitable and in inculcating a mindset to relearn, and retrain since fixed jobs will inevitably yield place to multiple jobs.
This Budget is appropriate and timely. In a sense, it combines political opportunism with economic compulsions.
NK Singh is chairman, Finance Commission of India
The views expressed are personal
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