Sound in intent

The run-up to the Union Budget 2015-16 was characterised by a high degree of optimism and an expected turnaround in the growth trajectory. From an industry perspective, the expectation was that the Budget would have measures designed for boosting consumption and hence accelerating growth.

There are some very potent measures in the Budget that are designed to achieve this objective.

The ‘JAM trinity’ (Jan Dhan Yojana, Aadhaar and mobile), while reducing leakages in subsidies, will improve disbursement and hence provide impetus to the consumption expenditure.

Measures such as increasing public expenditure on infrastructure and re-energising the public private partnership (PPP) model of infrastructure development are aimed at addressing the urgent need for infrastructure development in the country. The additional thrust on infrastructure and electricity — apart from improving efficiency — will also create employment and, hence, increase the overall consumer and consumption base. The rate of progress is likely to be faster with a larger role envisaged for PPP.

Also, the greater devolution of revenue to States will facilitate the implementation of the Goods and Services Tax (GST) and provide States resources to tackle their unique problems.

Another encouraging measure is the one for fostering entrepreneurship and encouraging the growth of small and medium enterprises (SMEs) in the country. This, combined with the government’s focus on ‘Make in India’, would add a fillip to domestic manufacturing. The thrust in increasing agricultural productivity and farm incomes could also be a boon for food manufacturers.

However, we believe the optimism capital — which was so effectively created in the run-up to the Budget starting with the election — has been underutilised.

In the consumption-led economy that India is, one could argue that economic growth depends more on people feeling rich than people being rich.

The revision of exemption on healthcare expenses and Provident Fund (PF) is a step in this direction.

The other social schemes on accident insurance and push to pension schemes are also well balanced.

But this Budget was an excellent opportunity to encourage consumption through some amendments to the taxation laws — especially those which impact consumers such as value-added tax (VAT) and excise. So far, these measures have been sparingly used.

At the same time increased tax on petroleum and service tax will increase input costs thus impacting consumer prices.

Also, the food processing industry — which accounts for just 10 per cent of the total food industry — is in need of a significant push from the government.

We are hoping that this will be taken up in the coming budgets.

But this Budget is distinguished by its clear articulation of future intent.

The trick now lies in how the government converts this vision into reality by actions on the ground.

The writer is the managing director of Britannia Industries

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