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Ooh la la...
The NDA II led by Narendra Modi is struggling to cope with serious economic and political conditions. High inflation, two years of drought, fiscal management in disarray, falling investments and poor growth in jobs, low industrial production and declining exports, mounting non-performing assets in banks, frequent elections and lack of consensus of political parties are weighty issues that are leaving little scope for big bang reforms.

Arun jaitley had to reckon with two more serious factors that call for immediate attention: higher expenditure  on salaries and pensions to government employees thanks to the 7th Finance Commission and the implementation of the One Rank One Pension (OROP) scheme for defence personnel. Add to these the hate relationship with the Congress, which means that the grand-old-party now opposes any and every move of the government including many of those spearheaded by it like the GST and the Land Acquisition Bills.

In this background Jaitley’s budget for 2016-17 appears a neat effort to make the best out of a tough situation. His sticking to the committed 3.9 per cent target of  fiscal deficit for the current year, of 3.5 per cent for 2016-17 and focusing on sectors that have shown remarkable growth are understandable. Surely the Finance Minister would not like to risk the gains on the fiscal management front; he has avoided the route of his predecessors who attempted to spend massively through hefty borrowings to stimulate growth, but failed miserably. Aided by the fortuitous steep fall in crude prices and by intelligent actions  in a few sectors of the economy, notably power, railways, highways, IT and telecom, there is commendable turn around.

With elections in the states a regular annual factor, the Finance Minister has also to focus on agriculture and rural development that impact large sections. Allocations have been massively stepped up on these sectors with ambitious goals like electricity for all and roads to every village.

 

The nine pillars…

 

The nine distinct pillars outlined by him are: agriculture and farmers’ welfare with focus on doubling farmers’ income in five years; rural sector with emphasis on rural employment and infrastructure; social sector including healthcare; education, skills and job creation; infrastructure and investment; financial sector reforms with focus on transparency and stability; governance and ease of doing business; fiscal discipline assuring delivery of benefits to the needy and tax reforms to ensure better compliance. Having selected these focus areas the Finance Minister has bestowed attention to these in full measure.

From the time of C Subramaniam in 1976 successive finance ministers have been attempting increasing transfer of resources to rural India. One notices much sharper focus during the Janata regime (1977-80) with Charan Singh and H M Patel directing large transfers; Manmohan Singh and Chidambaram later doing this through the MGNREGA scheme that assured employment for 100 days.

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