“The last budget of the NDA government has shown hints of minimum government and maximum governance through a combination of income tax cuts and higher social and rural sector spending. The fiscal consolidation glide path continues with the fiscal deficit lower at 3.4% (from 3.5% last year). Although the target of 3.3% was breached, considering that the deficit was 4.5% in 2014, bringing it down to 3.4% will count as a major success as it has helped to control public debt, interest payments and inflation.
The budget proposals are focused on the middle classes and the rural population. The removal of income tax liability for those who fall in the Rs. 2.5-5 lakh bracket would be of great help to the much neglected middle classes. With this move, 80% of those who file income tax returns will no longer have to pay the tax and it will give a boost to consumption and growth. The farmer income support scheme (PM Kisan Samman Nidhi) of Rs. 6000 per year will bring relief to the distressed small farmers particularly because this is a retrospective policy for which partial allocation is already made in the current fiscal. While landless farmers will not benefit from this scheme, the increased spending by the 12 crore beneficiary families would generate multiplier effects on the rest of the economy. The rural economy has also got a public spending stimulus from significantly higher allocations in various schemes such as NREGA (spending is up by 9%), irrigation scheme (by 15%), rural roads scheme (by 22.5%), rural drinking water scheme (by 49%) and interest subsidy scheme (by 20%).
In the education sector, the focus in firmly on science, engineering and innovation in line with one of the ten visions outlined by the FM for the next decade i.e. to build a quality, science oriented educational system. It is disappointing to note the cut in Higher Education Financing Agency’s allocation by 23.6% as it was a good initiative of this government to help educational institutions get soft loans for capital spending. The national education mission (encompassing literacy, primary education and teachers training) has increased allocation by 18%. This is a welcome move as our demographic dividend needs to be harnessed right at the primary schooling level. Jobs and skill development schemes have received higher allocation by 48% which will also help in training our rising youth population for contributing to economic growth. Overall the budget is a fine balance between pre electoral populism and fiscal arithmetic.”
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