The Budget 2017 signals an unprecedented shift. Beginning from the timing, structure and reforms that it has brought about. The Finance Minister has extensively looked into the recommendations of the FRBM Review Committee under my Chairmanship. The Central recommendation was to maintain public debt as a principal macroeconomic anchor in the framework.
The basis for moving to a debt anchor are standard government solvency constraints, a broader consensus attached with the debt ceiling combined with fiscal deficit as an operational target.
Debt also remains an important ingredient in the assessments released by Rating Agencies. Lastly, Debt is easily understood and can be communicated to the masses as an overarching prudence in the pursuit of macroeconomic policies.
The FRBM committee gives due cognizance to counter-cyclicality in fiscal policies through “Escape and Buoyancy Clauses”, as mentioned in the Budget.
The issue of the Fiscal Deficit target of 3 per cent recommended by the Committee for the next three years against 3.2 per ent adopted by the government is at best a fine balancing act.
The Transform, Energize and Clean (TEC) agenda has been aptly formulated by the Finance Minister to address core domestic concerns and global uncertainties.
Transforming India is a continuation of last year’s budget theme, focusing on the much need macro-economic stabilization measures and structural reforms to put India on a long-term growth path. Specifically, these include the record level of agricultural credit targets and enhanced budgetary outlays for irrigation.
The proposed model law on contract farming has immense potential to improve shelf life of agricultural products and reduce wastage. There is abiding relevance to the oft quoted remark of Gandhi that speed is irrelevant if you are going in the wrong direction. It becomes, however, of vital relevance if the direction is right.
This budget not only seeks to move with speed, but also in the right direction for the reasons stated in this piece. It remains a robust response to both external uncertainties and internal unpredictability.
By all reckoning, the external environment is becoming increasingly unfavourable and the Finance Minister has chosen a holistic path which, in no small measure, has been embraced by the markets. The Budget of 2017 has been largely seen as a sound commitment towards sound macroeconomic policies and adherence to continue on a path of fiscal consolidation.
(The author is a former Revenue and Expenditure Secretary.)