BY INVITATION. Implementation is the key

The NDA government’s third Union Budget (second full-year budget) provides a prudent and pragmatic policy roadmap to realise double-digit economic growth in the long run.

Looking through the global lens, India will continue to be the bright spot in the grim global economic scenario, upon implementation of the economic and financial reforms proposed in the Budget.

Despite the slowdown in the manufacturing and agricultural sectors and the additional burden on account of panel pay-out to government employees, as also OROP to defence personnel, the finance minister has proposed to adhere to the fiscal consolidation path.

This bold initiative will enhance the confidence level of funds and high networth individuals to make India a favourable destination of their investments.

The allocation to the farming sector and the proposal to spend large sums for irrigation projects for five years will transform the rural economy and will lead to higher income levels with consequent increase in demand for goods and services.

The objectives of doubling the income of farmers by 2022, and electrifying every village by 2018, are laudable. The investment in the social sector, healthcare and education will improve the quality of the lives of people in the rural and urban areas as well.

Building certainty in tax laws and the support provided to initiatives such as Make in India, Skill India, Digital India and Startup India will enhance the share of manufacturing in the GDP.

The recapitalisation of banks and insolvency and bankruptcy initiatives will make assets more productive. There will be a big boost to micro and small enterprises and employment generation by fund allocation to MUDRA Bank.

The auto sector will stand to benefit from the large investment in roads and highways and the proposed amendment to the Motor Vehicle Act to facilitate opening of the road sector in the passenger segment.

Reduction in duty rates for refrigerated vehicles by 1 per cent and extension of customs and excise concessions to electrically operated vehicles beyond March 31, 2016, are good initiatives. The proposal to have a credible dispute resolution mechanism will revitalise public-private partnership (PPP).

It is a welcome move to reduce the tax compliance burden and resolve retrospective taxation issues. Similarly, the proposed amendment of Cenvat Credit Rules to streamline the issues for manufacturers and traders with reference to the eligibility of credit and also distribution of credit between multi-unit/locations of manufacturers and service providers is a good move. This is an area of litigation at present; the provisions too are ambiguous.

Revised return facility has been introduced for the first time in excise. The Customs Act will provide for deferred payment of customs duties for assessees with a proven track record, and single-window facilties will be implemented at ports from the next financial year. The deferred payment of customs duty will have a positive impact on working capital of companies.

The proposed 45 per cent tax on undisclosed income will generate more income for the government.

On the negative side, taxing dividend over ₹10 lakh is a big disincentive for promoters/large investors. This government has been overwhelmingly supported by NRIs. Their remittances into India, to the tune of $70 billion, are the highest in the world, including China. However, their representation to the government to treat their ‘repatriable investment’ into India on par with resident investments, remains unattended in this budget.

The possibility of the RBI providing capital to banks, like central banks in developed countries, as suggested in the Economic Survey, could have been explored to lessen the burden on the government.

The Budget that has been presented is the best under the current circumstances considering the need of fiscal consolidation on the one hand, and on the other, countering the global recessionary trends.

There would be debate that the government could have possibly done better providing more sops to individuals. However, we need to look at the larger picture of boosting the rural economy and infrastructure growth so that India continues to be a haven of stability of sustained growth in this volatile and uncertain world.

Having said that, the Budget looks promising in intent, but the proof of the pudding lies in the eating and the success of the Budget will depend on its implementation.

The writer is the global co-chairman of The Hinduja Group. The views are personal

COMMENT NOW