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Editorial | March 2017

Not exactly an “Electrifying” Budget

Our power sector is not exactly firing on all cylinders. The bedrock of this sector, our thermal power plants, which anyway employ most workmen and host most investments, are doing rather badly, reflected in year-to-date plant load factor of only 59 per cent - the lowest in 10 years!

This low PLF is also not a surprise, in fact this situation is consistent with lower industrial demand of power, which in turn is in total synchronism with decline in capital formation, low credit growth, and a jobless lackadaisical GDP trend. In this scenario, the power sector, just like most other brick and mortar industries, was fervently expecting some kind of stimulus from the budget this year. This has not happened.

Job creation remains a top priority for the government, and this could be done relatively quickly by spurring huge investments into infrastructure building. By doing this, at least some of the jobs lost in the informal construction sector due to demonetisation might be recouped.

Speaking about infrastructure, specifically for the power sector, there is no exciting provision in the budget worth applauding, other than the staid disclosures on rural electrification, and reporting on solar power investments and that 21 discoms have joined the UDAY scheme.

However, the budget seems to have given some kind of a push for other infra sub-sectors, by allocating Rs.3.96 lakh crore on infrastructure, up an apparently whopping 80 per cent from Rs.2.21 lakh crore of last budget. But if we add the Railways Capex budget (which has been subsumed in this year´s budget) of Rs.55,000 crore of last year, the hike is a more sobering 40 per cent.

A real feel of the impetus expected in infra sectors from this budget can be had from the example of the road sector, where provision has gone up from Rs.64,900 crore in 2017-18, as against budgetary Rs.57,976 crore allocated in 2016-17, which perhaps reflects a small increase of just 5-6 per cent, when adjusted for inflation.

Even so, if execution capability improves across the board, and the government machinery succeeds in actually spending these allocations, we can expect a boost in infrastructure construction activities, although not on a huge scale as demanded by our economic situation.

By a stark contrast, the share of government spending on education has not risen; in fact, it has consistently fallen over the last three years, from 4.57 per cent of budget in 2013-14, to 4.14 per cent and 3.75 per

cent and finally 3.71 per cent in 2017/18 budgets. If this trend is reflective of our current social priorities, then we shall be moving farther and farther away from giving opportunities to our deprived children to improve their livelihoods. Education and health are social infrastructure sectors that give longer term dividends to our nation, and can be neglected only at great risk to our tomorrows.

Where the budget proposals cause the biggest disappointment in citizens´ mind, is in its total disregard for demonetisation, in its failure to propose any follow up actions with any teeth, to curb corruption and black money.

Most disruptive ideas are just disruptive, and not transformational. In the absence of a strategy, long term thinking and follow up actions, the demonetisation exercise together with this budget are not about to go down in history as extraordinary, and transformational efforts in economic planning, but are going to remain unsung as a budget most ordinary, albeit in extraordinary times.

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