2017 Budget | Breaking conventions; reflecting on GST, demonetisation 

The Hindu examines the Union Budget of 2017, presented by Arun Jaitley in the midst of two major financial overhauls: after demonetisation and before the introduction of the GST

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 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.

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).