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On the whole, it is a balanced Budget based on realism, keeping in mind the diverse requirements of the economy.
The Rs 10,000 crore tax free bonds for power sector, exemption of thermal power companies from tax for two years, the extension of sunset clause as also the facilities for coal mining with exemption from customs duty on machinery for mining and on imported coal, will speed up development of new power generating capacities as also improvement in the plant load factor.
In power development, solar energy has a special advantage for India and it is possible that about 20 per cent of power requirement can come from solar energy for which the Finance Minister has given facilities by way of exemption of equipment from custom duties.
The Finance Minister has been only too aware of the burden of subsidies on food, fertilisers and petroleum products. He has recognised the need and therefore suggested steps to ensure that subsidies are leakage-proof and will not exceed 1.7 per cent of GDP next year.
Stimulus to infrastructure
The Finance Minister has reduced the incidence of Income Tax for individuals by raising the exemption limit as also by changing the income slabs, apart from giving the tax benefit to savings. Similarly, the reduction in withholding tax will give stimulus to a number of infrastructure activities.
The widening of the base for services taxation with a negative list of 17 socially desirable services is a rational approach. The increase in service tax along with increase in excise duty from 10 to 12 per cent will certainly raise prices correspondingly all round. However, this measure is a better alternative to a higher Budget deficit which, in spite of the additional revenue of Rs 41,000 crore, is estimated to be 5.1 per cent in 2012-13.
The Finance Minister has recognised that export growth has slowed down because of the recession in Europe. International competition has become more aggressive and countries that provide incentives to exports are able to score. The Economy Survey underlines that export is an important driver of the economy. However, the Budget does not give enough attention to incentivising export activity.
(The author is Chairman, RP-Sanjiv Goenka Group and Vice-Chairman, CESC Ltd.)
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