The Demonitization and the Budget Playout

From the 690 seats this year to the 964 on the cards next year forming the backdrop of the general election in 2019 – the political canvas is chalked out for finance minister Arun Jaitley as he drafts the country’s economic policy. The political considerations infesting the budget mindspace since past two months would likely stretch onto a two-year fight. The effects of the demonetization sucker-punch to the solar plexus of the vast majority of Indians seem to have also bewildered Mr. Jaitley.

As he readies to present the Union Budget on February 1, Jaitley’s best-formed plans would have to inculcate demonetization-spiked changes – above those for launching the GST system. Adding to the woes is the fact that with GST rollout likely to be delayed, revenue forecasts would need to be remolded along conventional lines. With two metamorphic changes under three months calls for a shade more than being disruptive!

There are two other factors adding to the melee – the railway budget getting submerged with the Union budget; and, the perennial expenditure reporting format falling under the heads of Plan and non-Plan expenditure getting junked.

What’s of prime concern is how the economy slowing down impacts revenue, and how that, in turn, affects the spending initiatives – particularly, committed social sector or infrastructure expenditure, which cannot be shelved. The finance minister has already assured of higher govt. initiatives to pump-up economic growth but many other factors have come up meanwhile. With PM Modi assuring the nation of increased social spending under both new and old schemes in his new year eve speech, it would be interesting to see how things shape up in 2017.

 

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