I’ve prepared this article from the Budget speech of Finance Minister.
Five major challenges before the economy as informed in the budget by the Finance Minister are :-
1. Agricultural incomes are under stress. To increase the incomes of farmers, it is imperative that a National agricultural market is created, which will have incidental benefit of moderating price rises.
2. Increase investment in infrastructure through public investment. With private investment in infrastructure via the PPP model still weak, public investment needs to step in, to catalyze investment.
3. Manufacturing has declined from 18% to 17% of GDP as per new GDP data. Manufacturing exports have remained stagnant at about 10% of GDP. The Make in India programme is aimed at meeting this challenge, thus creating jobs.
4. There is need for fiscal discipline in spite of rising demands for public investment. In keeping with the true spirit of co-operative federalism, 42% share of the divisible pool of taxes will be devolved to states. This would empower states with more resources. Funds will also be transferred by way of grants and plan transfers. Thus, total transfer to the states will be about 62% of the total tax receipts of the country. In spite of the consequential reduced fiscal space for the Centre, the Government will continue supporting important national priorities such as agriculture, education, health, MGNREGA, and rural infrastructure including roads. Programmes targeted for the poor and the under-privileged will be continued.
5. Maintaining fiscal discipline is a challenge. Economic growth at 11.5%, has been lower in nominal terms by about 2%, due to lower inflation. Consequently, tax buoyancy was also significantly lower. Despite this, the challenging fiscal deficit target of 4.1% of GDP has to be met.