The Hindu Business Line : Spending power

Nothing gets as hyped as an anachronism which has advertising value — look at Valentine’s Day or Father’s Day or Mother’s Day…. or Budget Day. Yet, it does not make any sense in the Indian context to do anything dramatic on budget day.

Far better to speak of the ‘Aam Aadmi’, quote self-laudatory statistics and classics, sprinkle Yojnas across the top and serve up an insipid financial dish. Then the Government can get on with the real business of improvement, one step at a time, averting the intense scrutiny that the budget normally attracts.

In that context, I was pleasantly surprised by this budget. The focus on infrastructure was clear, as was the intent to promote public-private partnership in that area. There are four clear areas of focus in creating infrastructure:

Rural electrification, irrigation and water;

The golden quadrilateral, north-south-east-west corridors, improvement in railway infrastructure;

Improvement of urban infrastructure and slum clearance with specific reference to improving Mumbai’s drainage;

Supporting tax exemptions and incentives for the private sector in areas such as warehousing investments and light and heavy transporters

Second, measures such as increasing resources for the National Rural Employment Guarantee Scheme (NREGS) would directly benefit the consumer, immensely boosting the core theme in India-investing — the domestic consumption story. One-rank-one-pay and other such measures supplement this.

The reduction in surcharge on personal income tax should again spur domestic consumption. Thus we will create purchasing power in the hands of the people more efficiently than almost any other country.

The roadmap to free pricing of petroleum products, the tax incentive to petroleum gas along the lines of mineral oil and the intent to create a national gas grid again become important given that fossil fuel is perhaps the single biggest external risk for our economy.

Above all, let us not forget the removal of the hated Fringe Benefit Tax.

The budget, as I said earlier, is a non-event; but it does give direction to all on how the Government intends to function over the next year; and this one seems to indicate that we will see the Government taking advantage of the clear electoral mandate and focus on our greatest weakness.

All of this will have an impact on fiscal deficit and, over the months, we will see how this translates into inflationary pressures.

At this time, however, it is the best that any Finance Minster could have done. If quality of execution is in line with the clarity of vision shown by these measures, we should see significant economic prosperity over the next decade.

The author is Executive Chairman, JPMorgan Asset Management India Pvt Ltd.

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