Govt betting on SMEs, jobs: Bakul Dholakia

The government is betting on agriculture and Small and Medium Enterprises (SME) to boost economy and create jobs, according to Bakul Dholakia, an economist and the former Director of Indian Institute of Management - Ahmedabad (IIM-A). He said the country would grow at a rate of 7.2%, higher than expected, though that has nothing to do with the Budget. However, he thinks that fiscal deficit and inflation could pose a challenge.

Dholakia made the statement on Friday at a post-Budget discussion at Ahmedabad Management Association (AMA). City-based tax expert Mukesh Patel and politician Jay Narayan Vyas also took part in the discussion. Dholakia said that of the 1% incremental growth anticipated by the government 2018-19, 0.5% will be contributed by the agriculture sector and 0.5% by the manufacturing sector. "If the measures to boost agriculture materialize and Monsoon is good, agriculture can grow at 5% in 2018-19 against 2% in 2017-18," said Dholakia. He, however, said that calculating the cost of production in agriculture to determine the Minimum Support Price (MSP) would be a Herculean task for the government as the parameters are not clear.

According to Dholakia, fiscal Deficit, global price of crude oil and inflation may be causes for concern for the government next year. "The rise in MSP and rise in price of crude oil prices can increase inflation," he said. "Crude oil price can affect Balance of Payment and can pose a challenge to fiscal deficit which could have cascading effect on matters such as interest rates and investments."

Patel said the cess collected from individual tax payers has doubled between 2014-15 and 2017-18 to Rs 5,29,000 crore, and there should be some reward for them. He, however, pointed out that senior citizens would benefit from Standard Deduction of Rs 40,000 and the rise in tax exemption limit for interest income from banks and post offices to Rs 50,000. The limit for medical insurance has also been raised, he said. Patel drew attention to a critical change involving capital gain for immovable properties, wherein the lock-in period for bonds for capital gains from a building or land has been raised from three years to five years.

BJP leader and former state minister Jay Narayan Vyas, who is also an analyst, said the emphasis on agriculture and rural development was not guided by electoral dynamics, but by the will to boost rural economy and improve financial condition of the farmers. "The provisions are required to meet the food security challenges of the future," he said. "50% rise in price over the cost of production is just not enough. Farmers should have the autonomy to select which crop to sow, when to sell."

GROWING FAST

• Bakul Dholakia, former Director of Indian Institute of Management - Ahmedabad (IIM-A) said the country would grow at a rate of 7.2%, but fiscal deficit and inflation could pose a challenge.
   
• City-based tax expert Mukesh Patel said the cess collected from individual tax payers has doubled between 2014-15 and 2017-18 to Rs 5,29,000 crore, and they deserve some rewards.