Union Budget 2016-17

February 29, 2016

Finance Minister Arun Jaitley has rightly focused on rural and agriculture sectors in the Union Budget 2016-17. Rs. 87,765 crores have been allocated for rural development. To ensure effective utilisation of such funds, specific targets must be set and performance should be monitored.

In addition, the budget proposes allocation of Rs. 2.87 lakh crore as grants-in-aid to village panchayats and municipalities to boost rural economy. While theseare welcome moves, concurrent efforts would be requiredtobuild capacity of the third tier of governance to plan and effectively utilise the funds. In addition, it would be crucial to efficiently monitor the amount spent, to avoid leakages and fix accountability. Enactment of Public Procurement Bill will be an important step in this direction.

Given the distance between and central and local levels of governance, divergence of needs and capabilities thereof, the role of state and non state actors, such as state governments, bureaucracy and civil society organisations would the critical. These stakeholders will have to come forward and take the mantle to address the information and technical capacity constraints.

An ambitious target to skill one crore youth in next three years under the PM Kaushal Vikas Yojana has been set. Employable skills must be imparted to the youth so that they could make positive contribution to the economy. For this to happen, the skilling centres must be adequately equipped and modernized through industry tie-ups to provide necessary training and capacity building to the youth.

The government has also proposed a slew of reforms forthe financial sector.These include legislative reforms such as fast-tracking of bankruptcy and insolvency bill, introduction of legislation on targeted delivery of financial services using Aadhar, and amendment to RBI Act to give statutory backing for monetary policy. In addition,creation of new Financial Data Management Centre to facilitate integrated data analysishas been proposed.

Government would need to strategically prioritise these reforms to ensure their passage in the Parliament. It should engage constructively with the opposition, and should share credit for reforms envisaged during previous regimes, such as use of Aadhar information.

However, the government has chosen to recapitalize public sector banks despite their delinquent track record of sub-standard lending and inefficient debt recovery. One hopes that performance based indicators will be adopted for capital infusion and concurrent management reforms will be introduced for public sector banks.

It is also heartening to the note that a new policy for strategic sale of Central Public Sector Enterprises has been mooted. As a result, one hopes that government would move away from the myopic vision of high valuation as the sole consideration for disinvestment. Also, reliance on Life Insurance Corporation to bail out disinvestments should reduce.

A Public Utility Resolution of Disputes Bill has also been proposed to solve problems in infrastructure contracts, PPP and public utilities, along with regulatory relaxations in the public transport sector. CUTS has been advocating for these reforms since quite some time. A timeframe should be set to ensure that the proposals see light of the way at the earliest.

Pradeep S Mehta, Secretary General of CUTS International observed that overall the budget has optimal mix of policies for divergent stakeholder groups, while noting that some incentives could have been provided to reduce the burden on the middle income groups, and expanding the tax base.

He added that despite increasing public expenditure the government has decided to stick to fiscal deficit target, which is a good sign. Close scrutiny would be needed to ensure that government does not resort to accounting sleight of hand to demonstrate compliance.

For more information, please contact:

Pradeep S Mehta

Amol Kulkarni

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