DICTATION EXERCISE - 17

Madam Speaker, on this auspicious day of Vasant Panchami, I rise to present the Budget for 2017-18. Spring is a season of optimism. I extend my warm greetings to everyone on this occasion. Madam Speaker, our Government was elected amidst huge expectations of the people. The underlying theme of countless expectations was good governance. The expectations included burning issues like inflation and price rise, corruption in day to day transactions and crony capitalism. There was also expectation for a major change in the way the country’s natural resources were allocated, processed and deployed.

In the last two and half years, it has been our mission to bring a transformative shift in the way our country is governed. We have moved from a discretionary administration to a policy and system based administration; from favouritism to transparency and objectivity in decision making;¹⁴⁰ from blanket and loose entitlements to targeted delivery; and from informal economy to formal economy. Inflation, which was in double digits,¹⁶⁰ has been controlled; sluggish growth has been replaced by high growth; and a massive war against black money has been launched. We have worked tirelessly on all these fronts and feel encouraged by the unstinted support of the people to our initiatives. The Government is now seen as a trusted custodian of public money. I take this opportunity to express our gratitude to the people of India for their strong support. We shall continue to undertake many more measures to ensure that the fruits of growth reach the farmers, the workers, the poor, the scheduled castes and scheduled tribes, women and other vulnerable sections of our society. Our focus will be on energizing our youth to reap the benefits of²⁸⁰ growth and employment. Madam Speaker, I am presenting this Budget when the world economy faces considerable uncertainty, in the aftermath of major economic and political developments during the last one year. Nevertheless, the International Monetary Fund estimates that world GDP³²⁰ will grow by 3.1% in 2016 and 3.4% in 2017. The advanced economies are expected to increase their growth from 1.6% to 1.9% and the emerging economies from 4.1% to 4.5%. As per current indications, macro-economic policy is expected to be more expansionary in certain large economies. Growth in a number of emerging economies is expected to recover in 2017, after relatively poor performance in 2016. These are positive signs and point to an optimistic outlook for the next year.

There are, however, three major challenges for emerging economies. First, the current monetary policy stance of the US Federal Reserve,⁴²⁰ to increase the policy rates more than once in 2017, may lead to lower capital inflows and higher outflows from the emerging economies. Second, the uncertainty around commodity prices, especially that of crude oil, has implications for the fiscal situation of emerging economies. It is however expected that increase, if any, in oil prices would get tempered by quick response⁴⁸⁰ from producers of shale gas and oil. This would have a sobering impact on prices of crude and petroleum. Third, in several parts of the world, there are signs of increasing retreat from globalization of goods, services and people, as pressures for protectionism are building up. These developments have the potential to affect exports from a number of emerging markets, including India. Amidst all these developments, India stands out as a bright spot in the world economic landscape. India’s macro-economic⁵⁶⁰ stability continues to be the foundation of economic success. CPI inflation declined from 6% in July 2016 to 3.4% in December, 2016 and is expected to remain within RBI’s mandated range of 2% to 6%. Favourable price developments reflect prudent macro-economic management, resulting in higher agricultural production, especially in pulses. India’s Current Account Deficit declined from about 1% of GDP last year to 0.3% of GDP in the first half of 2016-17. Foreign Direct Investment increased from Rs. 1,07,000 crores⁶⁴⁰ in the first half of last year to Rs. 1,45,000 crores in the first half of 2016-17. This marks an increase by 36%, despite 5% reduction in global FDI inflows. Foreign exchange reserves have reached 361 billion US Dollars as on 20th January, 2017, which represents a comfortable cover for about 12 months of imports.

The Government has also continued⁷⁰⁰ on the steady path of fiscal consolidation, without compromising on the public investment requirements of the economy. Externally, the economy successfully weathered a number of shocks, the redemption of FCNR deposits, volatility from the US elections and the Fed rate hike. According to IMF forecast, India is expected to be one of the fastest growing major economies in 2017.  A number of global reports and assessments, over the last two years, have shown that India has considerably improved its policies, practices and economic profile. These are reflected in Doing Business Report of the World Bank; World Investment Report 2016 of UNCTAD;⁸⁰⁰ Global Competitiveness Report of 2015-16 and 2016-17 of the World Economic Forum; and several other Reports. India has become the sixth largest manufacturing country in the world, up from the ninth position previously. We are seen as an engine of⁸⁴⁰ global growth. In the last one year, our country has witnessed historic and impactful economic reforms and policy making. In fact, India was one of the very few economies undertaking transformational reforms. There were two tectonic policy initiatives, namely, passage of the Constitution Amendment Bill for GST and the progress for its implementation; and demonetization of high denomination bank notes. The advantages of GST for our economy in terms of spurring growth, competitiveness, indirect tax simplification and greater transparency have already been extensively discussed in both Houses of Parliament. I thank all Members of both the Houses for having passed the Constitution Amendment unanimously. I also thank the State Governments for resolving all relevant issues in the GST Council.⁹⁶⁰ Demonetization of high denomination bank notes was in continuation of a series of measures taken by our Government during the⁹⁸⁰ last two years. It is a bold and decisive measure. For several decades, tax evasion for many has become a way of life. This compromises the larger public interest and creates unjust enrichment in favour of the tax evader, to the detriment of the poor and deprived. This has bred a parallel economy which is unacceptable for an inclusive society.

Demonetization seeks to create a new ‘normal’ wherein the GDP would be bigger, cleaner and real. This exercise is part of our Government’s resolve to eliminate corruption, black money, counterfeit currency and terror funding. Like all reforms, this measure is obviously disruptive, as it seeks to change the retrograde status quo. Drop in economic activity, if any, on account of the currency squeeze during the remonetisation period is expected to have only a transient impact on the economy. I am reminded¹¹²⁰ here of what the Father of the Nation, Mahatma Gandhi, had said: “A right cause never fails”. Demonetization has strong potential to generate long-term benefits in terms of reduced corruption, greater digitization of the economy, increased flow of financial savings and greater formalization of the economy, all of which would eventually lead to higher GDP growth and tax revenues. Demonetization helps to transfer resources from the tax evaders to the Government, which can use these resources for the welfare of the poor and the deprived. There is early evidence of an increased capacity of Banks to lend at reduced interest rates and a huge shift towards digitization among all sections of society. We firmly believe that demonetization and GST which were built on the third transformational achievement of our Government, namely, the JAM vision, will have an epoch making impact on our¹²⁶⁰ economy and the lives of our people.

The pace of remonetisation has picked up and will soon reach comfortable levels.¹²⁸⁰ The effects of demonetization are not expected to spill over into the next year. Thus IMF, even while revising India’s GDP forecast for 2016 downwards, has projected a GDP growth of 7.2% and 7.7% in 2017 and 2018 respectively. The World Bank, however, is more optimistic and has projected a GDP growth of 7% in 2016-17, 7.6% in 2017-18 and 7.8% in 2018-19. This pick-up in our economy is premised upon our policy and determination to continue with economic reforms; increase in public investment in infrastructure and development projects; and export growth in the context of the expected rebound in world economy. The surplus liquidity in the banking system, created by demonetization, will lower borrowing costs and increase the access to credit.¹⁴⁴⁰ This will boost economic activity, with multiplier effects. The announcements made by the hon. Prime Minister on 31st December, 2016 address many of the key concerns of our economy at this juncture, such as, housing for the poor;¹⁴⁴⁰ relief to farmers; credit support to MSMEs; encouragement to digital transactions; assistance to pregnant women and senior citizens; and priority to dalits, tribals, backward classes and women under the Mudra Yojana. 

My overall approach, while preparing this Budget, has been to spend more in rural areas, infrastructure and poverty alleviation and yet maintain the best standards of fiscal prudence. I have also kept in mind the need to continue with economic reforms, promote higher investments and accelerate growth. The last one year was a witness to other major reforms, namely, enactment of the Insolvency and Bankruptcy Code; amendment to the RBI Act for inflation targeting; enactment of the Aadhar bill for disbursement of financial subsidies and benefits; significant reforms in FDI policy; the job creating package for textile sector; and several other measures. We will continue the process of economic reforms for the benefit of the poor and the underprivileged.¹⁵⁹⁰