In 2017, Finance Minister Arun Jaitley’s fourth Budget was positioned in the middle of two major financial overhaul actions of the Modi government. It had been less than three months since demonetisation, and about four months before the introduction of the Goods and Services Tax (GST) regime. However, Mr. Jaitley’s Budget initiated a departure from some traditions and conventions – the most significant being the merger of the Railways and the Union Budgets. The Finance Minister famously concluded his speech by saying, “When my aim is right, when my goal is in sight, the winds favour me, and I fly. There is no other day, which is more appropriate for this, than today.”
The Budget of firsts
The 2017 Budget was the first to merge the Rail and Union Budgets. The colonial-era convention was discontinued, and Mr. Jaitley argued that it was done to bring Railways to the “centre stage of the government’s fiscal policy”. The measure would facilitate “multi-modal transport planning between Railways, highways and inland waterways”, he said. Mr. Jaitley also assured the House that the functional autonomy of Railways would remain unaffected.
The second change in usual practice was to advance the Budget presentation in Parliament to February 1 every year. The objective was to avoid a Vote on Account and pass a single Appropriation Bill for FY 2017-18 before the conclusion of the then-ongoing financial year 2016-17. For perspective, Vote on Account allows a government to withdraw money from the Consolidated Fund of India (where all revenues, loans raised, and other money received by the government are credited) to meet their immediate requirements for a limited period.
Mr. Jaitley said, “This would enable the Ministries and Departments to operationalise all schemes and projects, including the new schemes, right from the commencement of the next financial year”. According to him, the executive departments would be able to fully utilise the available working season before the onset of the monsoon.
The third change did away with the plan and non-plan classification of expenditure. The focus was now entirely centred around Revenue and Capital Expenditure. Planned expenditures are the government’s spending towards bolstering the economy’s production capacity. Non-plan expenditures encompass all that is not included in the plan. It could relate to development and non-developmental expenditures, such as interest payments, pensionary charges and statutory transfer to States, among other things.
The objective here was to facilitate “optimal allocation of resources”, Mr. Jaitley told the House.
On the purpose of GST and demonetisation
The Finance Minister said that in the preceding year, India had been host to “historic and impactful economic reforms and policy making”. “India was one of the very few economies undertaking transformational reforms,” he told the House. This was in reference to demonetisation (November 2016) and the approaching introduction of the GST regime (July 2017).
Mr. Jaitley described demonetisation as a “bold and decisive” move. He said that tax evasion created unjust enrichment in favour of the evader – to the detriment of the poor and deprived. “Demonetisation 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,” he said. Reflecting on the immediate economic strains and loss of output, Mr. Jaitley said, “Like all reforms, this measure is obviously disruptive, as it seeks to change the retrograde status quo.”
He called GST the “biggest tax reform since Independence”.
The Constitutional (122nd Amendment) Bill was passed in the Lower House in September 2016 – firmly setting into motion the rolling out of the new GST regime. The notifications set out an outer limit of one year – till September 15, 2017 – to bring GST into effect. The rollout eventually happened four months after the Budget presentation, in July 2017.
In his Budget presentation speech, Mr. Jaitley told the House that since the Bill was passed, the GST Council had held nine meetings to discuss related issues, including broad contours of GST rate structure, threshold exemption and parameters for composition scheme and details for compensation to States due to its implementation, among other things. Addressing existing apprehensions, he assured the House that there would be no potential compromise on “the spirit of cooperative federalism”. “Implementation of GST is likely to bring more taxes both to central and State governments because of widening of tax net,” he added.
The ten focus areas of the Budget
The FY 2017-18 Budget, as Mr. Jaitley had said, was meant to pursue the agenda: Transform, Energise and Clean India.
This agenda stood on ten broad realms of focus. It included farmers (with a commitment to double their income in five years), rural population (providing basic employment and infrastructure), youth (provisioning education, skills and jobs), poor and the underprivileged (strengthening systems of social security, health care and affordable housing), infrastructure, digital economy, public service (effective and efficient service delivery), prudent fiscal management and finally, tax administration.
The 2017 Budget increased the corpus of the Long-Term Irrigation Fund with the NABARD by ₹20,000 crore. The total corpus now stood at ₹40,000 crore. In addition, to protect farmers against the advent of natural calamities, the coverage under the scheme was enhanced from 30% of cropped area in 2016-17 to 40% for 2017-18. This was to be extended to 50% by 2018-19.
Other notable announcements included pursuing Mission Antyodaya – to bring one crore households out of poverty and making 50,000-gram panchayats poverty-free by 2019. The primary objective of Mission Antyodaya was to survey and collect village infrastructure and services data and accordingly rank gram panchayats. The process has been undertaken annually since its announcement, with 44,125 gram panchayats covered in the inaugural baseline survey with another 2.2 lakh added in the subsequent year. Starting 2019, all 2.6 lakh gram panchayats were covered in a phase. At present, approx. 2.67 gram panchayats have been covered in the ongoing phase with another 693 in progress.
Other than Mission Antyodaya, the Budget also proposed to construct one crore houses under the Pradhan Mantri Awaas Yojana (Gramin) for those without a house, or living in kutcha houses. Till date, a total of 2.69 crore houses have been built under the scheme since it was first introduced in 2016.
The 2017 Budget also included disinvestment of certain public sector enterprises. Mr. Jaitley proposed a revised mechanism and procedure to ensure a time-bound listing of identified Central Public Sector Enterprises (CPSEs) on stock exchanges. The disinvestment list included Railways’ public sector enterprises as Indian Railway Catering and Tourism Corporation (IRCTC), Indian Railway Finance Corporation (IRFC) and Indian Railway Construction International Limited (IRCON). According to Mr. Jaitley, the disinvestment policy would foster “greater public accountability and unlock the true value of these companies”. “It will give them the capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for stakeholders,” he had said.
Finally, to make India a more attractive FDI destination and to increase FDI inflows by provisioning increased ease of doing business per the ‘Maximum Governance and Minimum Government’ principle, Mr. Jaitley announced abolishing the Foreign Investment Promotion Board (FIPB). It was responsible for processing FDI approvals and making recommendations to the Government of India.
Published – February 01, 2025 10:11 am IST
