The latest Union Budget for India was one that was announced with slowing industrial growth and demonetisation as the backdrop. The question facing the Finance Minister, then, was really, how to get the economy back on track.
Orbis Economics conducted analysis of what the budget could and/or should do, from a purely macro-economic perspective, much of which has been shared across social media in the past days. Here, we put it all together to give the reader/viewer a holistic picture of perhaps the most critical annual economic event for India – the Union budget.
Key ideas proposed for the budget were brought out in the posts, links to which are given below:
1. Can the centre meet its fiscal deficit targets? Our projected scenarios indicated that the centre would be unlikely to meet its defcit target in 2016-17, and could also relax the target for 2017-18.
2. Can the centre attempt to re-boot the capex cycle? With the private sector incapable of re-booting the Indian capex cycle, the task was up to the government, we argued. With capital spending having shown muted growth in the past few years, this was also an opportune time to do so.
3. Crystal Ball Gazing the FM’s announcements: Three key segments the budget could address were highlighted in this post – incentivising industrial production, re-vitalising the capex cycle and support to the public sector banks given the NPA challenges they are facing.
4. Recommendations for the MSME segment: In this video, three suggestions for the MSME segment were put forth – providing tax breaks, incentivising investments and employment creation.
Analysis of Budget announcements
The Union Budget, clearly was paying heed to the macro-economic perspective, with its focus on ensuring that investments as well as consumption get a boost. Below Here is our take on the budget announcements:
1. For its focus on fostering economic growth, the Union Budget 2017-18 gets a thumbs up: The budget addressed critical macro areas including improved capex, boost to consumption through tax breaks and relaxation of the fiscal deficit target.
2. Verdict for MSMEs: The tax relief for MSMEs with a turnover of upto INR 50cr is a welcome step, as are some of the other major announcements which will improve economic activity.
Number crunching budget data
But this is not all. The budget numbers themselves consist of a slew of interesting trends. Consider the following:
- Revenue expenditure growth has over halved from last year to nowThe Finance Ministry is very optimistic about income tax collections next year
- Absolute level of fiscal deficit envisaged is higher than last year, after falling during the previous year
To know more about interesting trends in the budget, please leave your e-mail address in the comments section below and we will send the full budget report.
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