ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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An Examination of Revenue Generation

The revenue side of the budget is scrutinised to understand if the government is being realistic about revenue generation in 2017–18. Clearly, there is over-optimism, given that economic growth will be slow. Too much is expected from voluntary disclosure and penalties, while incentives are not in place. It would make sense to allow some slippage in the deficit targets in order to revive the economy. In addition, the increasing problem of cesses is discussed with reference to the Krishi Kalyan Cess to assess whether cesses serve the purpose for which they are introduced.

The Union Budget 2017–18 was presented under the shadow of the impact of demonetisation that was sprung on the Indian economy in November 2016. The consensus among most economists is that demonetisation will impose significant costs on the economy (Basu 2016; Gopinath 2016; Rogoff 2016). The Economic Survey 2016–17 (2017: 2) itself recognises this: “Short-term costs have taken the form of inconvenience and hardship, especially those in the informal and cash-intensive sectors of the economy, who have lost income and employment.” The Survey also recognises that the informal sector has suffered substantially more than the formal sector. Of course, the Survey does hold out the promise of the long-term benefits of demonetisation, but it is far more circumspect about this than the budget, which states, “We firmly believe that demonetisation … will have an epoch-making impact on our economy and the lives of our people” (Budget Speech 2017–18: 6).

Despite the bravado, the budget seems clearly designed to mitigate the adverse effect of demonetisation and alleviate the distress of those who suffered its consequences the most. Much has been written about the rural and infrastructure focus of the budget, though one does get the feeling that the opportunity of undertaking bold reforms has now been lost for the rest of the term of the present government. With the Lok Sabha elections due in 2019, the next two budgets will be framed to secure the re-election of the government as the overriding objective.

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Updated On : 7th Mar, 2017
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