Budget & Beyond: What next for the Indian Economy?

In February 2017, Synergia Forum hosted Prof. Narendar Pani, National Institute of Advanced Studies; and Dr. Parthasarathi Shome, advisor to the Indian Finance Minister, 2013, to a discussion on the Indian budget and Indian economy. Issues discussed were the new GDP series, Budget-2017, Agriculture and Demonetization.

Dr. Shome said that the introduction of the new GDP series had created some doubts in academic circles. The adjustment for the new edition would have to been reviewed over the full series, to assess net impact. The Budget has provided relief for taxpayers, set the stage for later introduction of GST but may not stimulate foreign investment.

More importantly, coercive measures by the Tax Administration may have adversely impacted the business sentiments in the country. He pointed out that in the global indices, India has not done well , both in ‘ease of paying taxes’ and ‘ease of doing business’. He also said that the budgetary target for 4% growth in Agriculture was ambitious. Historical evidence suggested that 4% growth in Agriculture, had only been achieved after four consecutive years of above-average monsoon.

Dr. Pani said that the government deserved compliments for presenting a budget that was not populist. However, he suspected the government was compelled to avoid populist measures because of the impact of demonetization. He said the national demonetization exercise had caused considerable hardship to the poor, the informal sector, rural India and the construction Industry. He also pointed out that recent state elections had shown little impact of demonetization and that unregulated cash expenditure was at an all-time high.

In the discussions which followed views were shared on affordable housing, increased allocation to MNREGA and bank re-capitalization. Economics students of Christ University also participated and were keen to understand the employment implications of Industry 4.0. Dr. Shome summed up the discussions by saying national budgets were more about providing allocations to different sectors of the economy and less about the outputs they delivered. He suggested there should be performance audits, for both federal and state budgets.