The Union Budget that was presented on February 1 has received a mixed bag of comments with some praising it and other criticizing it for lack of concrete policy measures. The Public Policy Club of IIM Bangalore in association with Center for Public Policy, IIM Bangalore organized a panel discussion on the Union Budget 2017, with the focus being the budget’s impact on the macroeconomic conditions of the nation. The panel boasted of names of Mr. Shekhar Vishwanathan (Vice Chairman and Director Toyota Kirloskar Motors), Mr. M. Govinda Rao (Emeritus Professor, National Institute for Public Finance and Policy) and Dr. Rajeev Gowda (Member of Parliament, Rajya Sabha). Despite the date and time of the panel discussion being scheduled on a sunday morning when students prefer to wake up late, the room was fully filled with an eager audience.
The first speaker for the day, Mr. Shekhar Viswanathan, spoke positively on tax reduction. However, he said that the decision to tax carbon credit sale will not be effective in controlling pollution, rather the buyer of credit should be taxed to keep pollution under check. He then shifted focus to MSME in India and spoke on the need to address the capital constraint faced by them. Coming from an automobile background himself, Mr.Shekar Viswanathan, segued into hybrid vehicles. He spoke on the need for the encouraging alternate modes of transportation such as electric and hydrogen powered vehicles. However, he added a word of caution about the harmful effect the cannibalization in this sector could have on the supplier industries currently dependent on IC vehicles.
Mr. M. Govinda Rao started with the statement that budget is a big event in the country and hence expectations were always high. He started with a criticism on the revenue budget, wondering aloud as to how the revised estimate and budget estimate of the budget were the same, with no change in numbers. He then moved on to discuss about demonetization. He said that policy makers were not aware of the exact impact of demonetization. With most sectors of economy slowing down he lamented the absence of sufficient measures to boost the economy. The capital to GDP ratio is lowest in years in India and with no investment the economy will be slowing down. He also spoke about the need to revisit subsidy. At the conclusion of his speech he moved to the highly anticipated GST tax and spoke about how there is poor data to substantiate the government’s claim of a 2% increase in GDP when GST is implemented. He also said that the GST was not a single tax rate implementation but had seven tax rates which would defeat its original purpose.
The last panelist was Mr. Rajeev Gowda. He started with criticism of the demonetization of currency implemented in India. He said that though the idea was good it was not implemented well. With difficulty in tracking money he was doubtful if the impact demonetization will have on black money would be significant. He qualified the increase in NREGA spending and tax cuts as mere damage control measures to appease the voters. He was not impressed with these damage control measures and said that the tax cut might only marginally increase spending post demonetization. He then shifted gears from consumer spending to investment. He spoke about how industries in India were neither borrowing nor spending resulting in economy not improving. He also said that the banking system in India was under stress and lamented the unemployment in India. He ended on a positive note by saying that the affordable housing schemes has the potential to increase employment in India.
Once the panelists had completed their views on the budget, there was a brief discussion on the views put forward which was moderated by professor Rupa Chanda. Following this discussion, the floor was open to questions from the audience that brought forth questions on impact of Make of India and employment in India. At the end of the event, there was a prize distribution for winners of a case an article writing competition organized by the Public Policy Club – Catalyzta. Participants had to submit a write-up on the 2017 budget. Vijay Venkatesh and Amanpreet Singh, first year PGP students from IIM Bangalore had secured the first place and were felicitated on stage.