It should be granted right at the outset that the current state of the economy, weighed down as it was by years of persistent inflation, zero growth in manufacturing, a burgeoning fiscal deficit and policy paralysis, was too brittle to provide the new Government any manoeuvring room for bold policy initiatives in the short run.

More clarity needed

So, while one could not reasonably have expected anything dramatic from this Budget, what was expected from the new Government was a clear articulation of the long-term direction of its fiscal policy and an assurance of stability in its tax regime.

But the message that came across in the Finance Minister’s Budget speech, while comforting to the frayed nerves of all stakeholders, could have been clearer.

It seemed that the minister was safeguarding his long-term credibility at the cost of immediate clarity.

The Retrospective tax amendment has been a dampener to investment sentiment especially to that of foreign investors. The minister could have made an unequivocal statement that it will not be resorted to; but he merely made an in-principle statement that such amendments will not ordinarily be brought in and delegated the matter to a Central Board of Direct Taxes (CBDT) committee.

On the question of Goods and Services Tax (GST), instead of a firm roadmap for its introduction, what we got was a statement of hope to bring a final resolution to all GST-related issues in FY2015.

The relaxation of FDI to 49 per cent in Defence and Insurance sectors is welcome but how far it will succeed in attracting foreign capital is a moot point because it also came with the corollary of Indian management control which is anathema to most multinationals.

The Finance Minister accepted the challenge of a fiscal deficit of 4.1 per cent; but by calling the target daunting, indicated the stretched nature of the target.

Many positives too

However one should not complain too much and lose sight of the fact that given the state of the economy the new Government has inherited, it was in a catch 22 situation — there was an unstated expectation for it to deliver on its growth promise even in this Budget, while doing so was clearly not possible in the short run.

So let us focus on the positives of this Budget: The statement of direction on the above policy issues may have been a bit short on clarity; nevertheless the fact that those statements were made should be applauded.

The extension of investment allowance of 15 per cent to investments in plant and machinery of more than Rs. 25 crore, as against Rs. 100 crore will incentivise investments in small and medium-scale industries.

The availability of advance rulings even to residents should reduce fiscal uncertainties and thereby encourage bolder business decisions.

The strong focus on Infrastructure — roads (NHAI and rural roads), power (Gujarat model of separate feeder lines, 10 year-tax holiday for power companies), housing (REITS, support to affordable housing), steps to incentivise warehousing and Smart Cities; the increase in tax slabs, Sec 80C limits, PPF investments and interest exemption on housing loans — all these should bring much cheer to the common man.

The writer is with the Group Executive Board, Mahindra & Mahindra