New Delhi, Feb. 27
THOUGH the shadow of Bihar elections will hang heavy over Parliament tomorrow, industry and corporate circles are expecting that the second budget of the Manmohan Singh Government will drive investment, create an enabling environment for industry to grow and also have a significant initiative for development of rural India.
The optimism is based purely on the reputation of the three main players in the Government the Prime Minister, Dr Manmohan Singh, the Finance Minister, Mr P. Chidambaram, and the Deputy Chairman of the Planning Commission, Dr Montek Singh Ahluwalia.
This trio is expected to produce something that is pragmatic and based on sound economic logic and not just political rhetoric.
Focus on infrastructure
The broad outlines of the budget are available now. Infrastructure development is very much in the focus and the Government will push for public-private partnership (PPP) in ports, roads, airports, civil aviation, real estate development and the like.
In other words, an investment boom would be encouraged with resultant benefits in other segments of the economy.
The brick and mortar industry is also expected to benefit from the opportunities that would come by way of the National Urban Renewal Mission that the Government is expected to launch, leading to massive construction activity in urban India.
The private sector will also get to play a role in the `New Deal for Rural India' or `Bharat Nirman' (development of India), which too is expected to feature in the Budget announcements.
Under this programme, rural road development, rural electrification, construction of irrigation facilities, educational and healthcare centres and other such facilities are to be created, mostly on the basis of public-private partnership.
Thus, PPP could be the catchword under which an investment boom could materialise.
The information technology sector could be in for a pleasant surprise since e-governance is a high priority item on the Government's agenda.
Another widely expected move in the Budget is rationalisation of taxes and duties. Though simplification and some lowering of duties are expected, much would depend on the fine print as the devil could well be in the details.
The Finance Ministry has already tightened screws on tax leakages and more of this could be in the offing in order to garner more revenues.
The textiles industry is expected to receive considerable attention, possibly through a restructured fund for technology upgradation.
This sector has substantial employment potential and opportunities have opened up with the end to the quota regime in world trading in clothing.
The Budget is unlikely to report botched up Government revenues, except some slippage in revenue deficit, since personal income tax collections have improved, customs revenue has looked up and interest burdens have fallen somewhat.
With expenditure contraction reported this year, the fiscal deficit is likely to be near the target of 4.4 per cent of the gross domestic product (GDP).
Service tax is expected to contribute higher revenues with the coverage extended, possibly to net in doctors, lawyers, hospitals, diagnostic labs, schools and air travel firms. Once the mess in imposing service tax on goods transport agencies is sorted out, substantial revenues could come in from this segment.
If the Left parties could be managed, the Government would be looking for higher revenues from public sector disinvestment, though this fund would now be channelled into designated expenditure streams.
There is possibility that the disinvestment target could go up to around Rs 12,000 crore from Rs 4,000 crore in the last Budget.