• Macro Economy
  • Demonetisation
  • Budget 2017
  • Views And Commentaries
  • Fiscal Policy
  • Economy Research
January 30, 2017

Budget will try to ease the demonetisation pain

Theme 1: Testing times for fiscal consolidation

  • The Budget has two immediate tasks cut out: assuage the shock received by private consumption from demonetization, and bolster faltering investment demand. How much fiscal room does the government have? Can the government push growth and still meet the FRBM target of 3% fiscal deficit target?

Theme 2: Can the budget revive investments?

  • Two things the budget can do to revive investments – lift up the consumption cycle, and continue to push infrastructure spending there. Budget thrust needed on sectors that can immediately push job creation

Theme 3: Budget thrust needed on sectors that can immediately push job creation
 

  • Despite a pick-up in GDP growth, fewer employment opportunities are likely to have been created in the past three years. That’s because sectors with the high potential to absorb labour have grown at a slower pace. For immediate benefits, the forthcoming Union Budget should choose to support sectors hit hardest by demonetisation and those that are more labour intensive, such as the small and medium enterprises segment, roads and low-cost housing. But long-term focus must be on alleviating structural constraints to employment creation