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The Budget has been an annual exercise for over a 100 years. The East India Company was a listed company on the London Stock Exchange and taxes were its only source of income. Hence, the Budget had a special annual relevance. The world has changed. Do we need an annual Budget?
All of us want to see India climb back to a level of 7-8 per cent GDP growth as against the current 4-5 per cent. That is the true long-term question for any Budget.
Budget for whom? The economic world is a volatile place and people look for stability. At the same time, no Budget can please everyone. So, whom is the annual Budget aimed at?
The Budget tries to influence the perceptions of: The global investing community; the current investors and companies invested in India; the States of India and their leaders; the electorate; and the party and allies ruling the country.
The electorate is possibly the most important of the lot. What can the electorate look forward to in this Budget? It promises an increase in infrastructure in digital technology, smart cities, education, and investment in agriculture with a ₹500-crore price stabilisation fund.
There is a ₹5,000 crore investment in warehouse infrastructure fund. Nearly 30 per cent of the food produce in India goes waste due to poor storage; hopefully this will alter that loss.
There is a substantial ₹8 lakh crore target for rural credit. Besides, there is an increased outlay for national highways and rural roads. The Budget enhances outlay for health and promises sanitation for all by 2019. It earmarks ₹10,000 crore to promote micro, small and medium enterprises.
Small-scale industry was in focus in the past when governments saw it an as alternative to large firms. Over the years, it has been understood that small and medium companies can be a powerful ally to large companies and do not need to compete with them. Eco system thinking is gaining ground in every industry, and we should promote that in the future.
Education gets a big investment with ₹69,000 crore, 70 per cent of this going towards schools.
With this investment, India will have 18 IIMs and 21 IITs, more than a five-fold jump in number of institutes and a 15-fold jump in graduates from these prestigious institutes.
The global investing community will see this Budget as a long-term signal to improve basic areas of infrastructure, health, education and creating a positive environment for investment.
A lot of emphasis in the Budget is on PPP (private public partnerships). PPPs have not exactly worked because investors did not see an attractive and consistent policy.
This Budget would have built some extra trust in this area as this is the first of five budgets. The benefits of investment allowance and clarification on transfer pricing are ‘trust building’ moves.
Current investors and companies know that some industries will benefit and some challenged in every Budget. This one is no different; its sops for small TV producers may be negated by flat screen technology. India has the potential to be a global electronics consumer market as well as a big producer. A basic chip or fabrication plant is a must for this vision. The Budget does a great balancing act in reconciling the interests of the Centre and the States.
The allocation of grants and loans for States goes up from ₹2.12 trillion to ₹4 trillion. That should make the States stronger in pursuing execution of the big projects.
Long-term policy Every Budget over the last 15 years has been a statement of policy intent. The GST is a move we can expect in the next few months.
Simplifying the tax structure will benefit the full value chain, break down many unnecessary investments by States and also the paperwork needed to run a business in multiple States.
The implementation of the GST can add more than 1-2 per cent to the GDP growth, according to industry bodies.
If our objective is to improve the living standards of the average Indian and create an investment climate through clear and consistent policies, we must be more long term in our approach. The annual Budget might have outlived its usefulness.
The writer is Chairman and CEO of PepsiCo India
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