FROM THE C-SUITE

For the current year’s budget reviving the investment cycle & emphasis on “Make in India” campaign were the clear priorities for the FM. Straddling the challenges of stressed infrastructure assets & rising NPAs for the sector and the Government’s budgetary constraints, the FM has wisely chosen to seek moratorium on the fiscal deficit time table to find resources for the infra investment in the near term. Increased budgetary outlay to infrastructure and setting up of National Infrastructure Fund are positive measures. While the FM has acknowledged the need to revitalize the PPP route of infrastructure development, there is no clarity on the specific plans. Plug & play concept in Infra sector is a bold ambition and the country would gain significantly if the Government achieves this objective. Integration of all clearances and approvals prior to award of the project, while highly desirable, would be a significant challenge even for the Government to adhere to project implementation timelines. Speedy resolutions of issues surrounding stalled projects should precede fresh award of new projects. In that context, capacity enhancements in thermal & renewable power would hold interest only if the current travails of the power sector are well addressed and efficiently resolved.

For meeting the vast investment requirements of the country, access to both domestic and foreign savings are important. Domestic savings have suffered in the last few years due to elevated levels of inflation. There are measures announced in the Budget to channelize the domestic savings into infrastructure formation by launching tax free bonds. Liquidity and market making in these bonds are important for their success. Measures to curb black money is crucial to widen the tax base and generate legitimate investments. Government needs to be complimented for addressing this issue head on. Removal of distinction between foreign portfolio investments and foreign direct investments would help channelize flow of foreign capital. Not withstanding these, the details for the overall funding plans of the Government to pump prime Infrastructure sector remains fuzzy.

Clear timeframe for GST implementation from April 2016, intention to reduce Corporate tax ratesover the next four years and additional depreciation for new plant and machineryfor units engaged in the generation and distribution of power are welcome measures under the Make in India initiative. Affordable cost of land & associated infrastructure, faster approvals, availability of liquidity at competitive cost and skill upgradation are key success factors for Make in India campaign. Absence of specific tax incentives for the Make in India initiative is disappointing and perhaps a missed opportunity.

While the budget seems to have identified the thrust areas well, implementation roadmap and resource planning appear tentative. Plugged in alright, but the game needs good playing.

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