This Budget had the backdrop of a strong mandate for the new government and huge expectations from an aspiring, growth hungry and urbanising India. On the other hand, the fiscal space was limited and new, external risks related to the monsoon and oil prices have become evident. Against this daunting backdrop, the Budget has upheld fiscal prudence, laid out the government’s medium-term vision and also managed to outline many measures to spur growth in the near future. In that sense, the FM has indeed done a splendid job.

In many ways, this Budget signals a critical message to investors that India is here to do business in a stable and predictable way. Be it the assurance of no retrospective changes in taxation regime, the expanded scope of advance ruling or changes in the transfer pricing regulations. These augur well.

Well conceived incentives

Liberalisation of FDI limits in insurance and defence sectors are welcome too. The FM has also clarified that GST is not an issue of debate. So we can look forward to its implementation in the not too distant future.

There is a visible thrust on roadways, waterways, infrastructure for urbanisation, housing, industrial corridors and digitisation. These appear to be the chosen vehicles for pushing more investment in the economy in the near-term and for boosting India’s competitiveness in the long-term.

Doubling of gas grid and the extension of incentives for power generation capacities are also good moves. It is encouraging to know that steps are being taken to improve the availability of coal for the power sector.

At a broader level, the government is trying to channel more long-term savings and foreign investments into the infrastructure sector. A number of initiatives are going to be implemented through the PPP route. While this approach of partnership is definitely welcome, it would be worthwhile for the implementing agencies to study the bottlenecks that PPP projects have faced in the past and to address these in future.

The changes in the personal income tax will provide some benefit to the masses and boost their purchasing power in these times of high inflation. One hopes that the increase in deduction for interest on housing loans, along with the other measures to attract more investment in the sector, will not only provide a boost to the housing sector, but will create a multiplier effect for the larger economy.

The FM has also outlined the government’s vision for social sectors and for strengthening the welfare mechanisms for the marginalised sections of the society. Health, nutrition, elementary and higher education, skill building and well-being of senior citizens are being addressed proactively. The continuation of the thrust on welfare measures shows that the government is equally committed to development and inclusion as it is to the re-acceleration of the growth engine.

There are two things that particularly struck me in this Budget. First is that there are several initiatives to promote development of the North-East, hilly states and Jammu and Kashmir.

Second, there is also a focus on connecting India - not only through roads, but through village-level broadband connectivity and even community radios. The implicit thread in these programmes seems to be that more connectivity and greater integration will mean broad-basing of the growth process and expansion of development opportunities across the length and breadth of the country.

Fiscal strategy

It is noteworthy that the imperative to press the pedal on the growth front has not derailed us from a fiscally sustainable strategy. The FM has not only stuck to the fiscal deficit target of the interim budget, but has set out a trajectory to bring down fiscal deficit to 3 per cent of GDP by the year 2017.

Last year, many analysts believed that Indian economy was perilously close to a macroeconomic crisis. Though subsequent reduction in fiscal deficit and current account deficit have since steadied the ship, it is still very important to ensure fiscal consolidation. It is, therefore, good to note that the FM has presented a responsible trajectory on this front. He has announced an Expenditure Management Commission to suggest reforms to bring down the expenditure.

The minister has also outlined the approach for the future by emphasising the need for well targeted subsidies. Hopefully, as investment and growth start looking up, it would have an effect on the buoyancy of tax collections, especially in a more stable and predictable taxation regime.

When these things fall in place, together with the build-up of infrastructure and connectivity initiatives as envisaged, it should lead to a virtuous cycle of growth along with fiscal prudence. Investors and the business community can take heart from this Budget surely as a harbinger of ‘achhe din’ ahead.

The writer is the chairman of Aditya Birla Group