Budget 2016 shows govt’s commitment to fiscal stability: Shikha Sharma, MD, Axis Bank

The Economic Survey noted that “fiscal consolidation continues to be vital, and will need to maintain credibility and reduce debt, in an uncertain global environment, while sustaining growth”. It saw the ‘chakravyuh’ legend from the Mahabharata as a metaphor for the Indian economy in the 21st century in the context of current restrictions on “exit” of firms. But this applies as much to the path of fiscal consolidation laid out in the previous Budget.

Having committed to the path, the Budget did not deviate, even in the face of multiple constraints, in recognising that growth requires macroeconomic and hence fiscal stability. Equally important, the underlying assumptions of revenue growth, which are crucial for achieving the target, are quite realistic.

The focus of the Budget – front and centre of the nine pillars of a transformative agenda – is agriculture, animal husbandry and the broader rural economy, as it should be. Budgetary allocations for measures to de-risk agriculture have been increased 35%. These initiatives include widening the scope of crop insurance, water management, a unified agricultural e-platform to improve market access for farmers, rural roads, MNREGS, village electrification, etc.

The social sector, in particular, is viewed as a key component of the transformation. An important feature of the Budget is the emphasis on job creation. Compared to the past, the drivers of growth are likely to be very different in the next decade. Improving governance and the ease of doing business are seen as steps to incentivise entrepreneurship, encourage startups, and more broadly SMEs (small and medium enterprises), which are likely to be the major engine of job creation. The online database of the National Career Service will improve access to job opportunities.

The banking sector will remain the major source of finance for investment. The Budget builds on earlier measures, in coordination with RBI, to alleviate the recent stress on banks’ balance sheets.

The Bank Board Bureau and a road map for consolidation will reinforce the outlay for recapitalisation of public sector banks. Efforts to further develop corporate bond markets, internationalise the rupee and permit greater access to global capital pools will expand resources available for funding the substantial capex needs.