In an extremely difficult and challenging economic situation, Finance Minister P. Chidambaram has presented a very practical Budget which would amplify economic growth while promoting stability.

The Finance Minister has not only reduced fiscal deficit in the current year, but also has kept his word of maintaining it at 4.8 per cent in 2013-14. The Budget will make a qualitative and quantitative change to the economy which had been under some stress. Chidambaram’s Budget is a very strong attempt in making investment in India easy, friendly and predictable.

Spur to investment

The Finance Minister has given special attention to acceleration of investment by providing investment allowance at 15 per cent to companies on investment of more than Rs 100 crore. This hopefully will generate investment in manufacturing industry but would have been more effective had it been extended to all investment in plant and machinery.

As the economic survey underlined, one of the bottlenecks for development was the 9 per cent peak power deficit. To accelerate power development the Budget provides for zero custom duty on electric plants and machinery, low cost funding and incentives for renewable energy.

The increase in investment has to be supported by increased savings. The latter will be encouraged with incentives such as inflation-linked bonds, which will also curtail import of gold. The liberalised Rajiv Gandhi Equity Savings Scheme (RGESS) will generate direct savings to the capital market which will be further activated with reduction of STT.

While ensuring stability of tax system, both direct and indirect, the Finance Minister has imposed 10 per cent surcharge on domestic companies with income of more than Rs 10 crore. This will partly negate the benefit under investment allowance.

With higher inclusive growth and lower fiscal deficit, it will be possible to generate more employment and stabilise inflation which has plagued the common man for quite some time.

Overall, an extremely good Budget.

The author is Vice-Chairman, RPG Enterprise

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