Only so much a Budget can do
Only so much a Budget can do

Only so much a Budget can do

We do live in unusual times. So much so, that some of us may be justifiably inclined to call these disruptive times. Politically, the year 2016 has been a year of black swans globally, and back home in India we have seen the curious case of an economy purportedly growing at the fastest clip in the world, but failing to create jobs. We ended the year with the 'Note Ban', when policymakers turned disruptors.

Disruptions do not follow precedents, and hence, do not offer themselves to analysis based on extrapolation of past experiences.

In 2017, we have an external environment fraught with unprecedented uncertainties in which our politico-economic planning, better known as 'budgeting', has got done. The icing on the cake of unknowns were the potential introduction of GST mid-year, and preponement of the Budget Session by a month to 1st February. These have injected further complications in forecasting indirect tax revenues, and in estimating FY17 year-end numbers, respectively. There is also a looming revival in commodity prices (read petroleum prices), to contend with. Since nothing can be done by the government to decipher these variables, we can look at what should have been, and what have turned out to be the priorities for the government this year.

Creation of jobs remains a top priority of the government, and this could be done relatively quickly by spurring huge investments into infrastructure building. By this, at least some of the jobs lost in the informal construction sector due to demonetisation might be recouped. The Budget seems to have made a huge push in this direction, by allocating Rs 3.96 lakh crore to infrastructure, up 80 per cent from the Rs 2.21 lakh crore of the previous Budget. But if we add last year's Railways Capex Budget (subsumed in this year's Budget) of Rs 55,000 crore, the hike is a more sobering 40 per cent. A real feel of the impetus expected in infra from this Budget can be had from the example of the roads sector, where the provision has gone up from Rs 64,900 crore in 2017-18 as against the budgetary Rs 57, 976 crore allocated in 2016-17, which perhaps reflects an increase of just 5-6 per cent, 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 as massive a scale as demanded by our sluggish economic situation.

In addition to these proposed infra investments, all of which will be cement guzzlers, what could be more good news for the cement industry is the encouragement given to housing in this Budget. Not only that rural housing has been supported, affordable housing has been accorded 'infrastructure' status. In an otherwise moribund market situation, these measures could be just what the doctor would prescribe, for the ailing cement sector, by promoting demand in both retail and institutional segments of the market.

Although the Budget did not do much on badly needed follow-up actions to curb corruption and eradicate black money, missing an opportunity to bring some semblance of respectability to the motives behind the so-called demonetisation, nor did it introduce the tempting social intervention of Universal Basic Income. On the whole, we would like to categorise this as a 'cement friendly' Budget. If this Budget is quickly followed by introduction of GST by the middle of the year, the cement industry may yet see recovery happening as early as the later half of the current financial year.

After all, there's only so much a Budget can do, and now it is up to the industry to respond.

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