It is a prudent growth-oriented budget with a special focus on improving healthcare, education, livelihood and infrastructure sectors. I think political compulsions made the FM decide that the best way is to play it safe, economics calls for austerity while the politics demands profligacy – in a nutshell, it is a fine balance between populist measures and hard-nosed reforms.
To project India as a favourable investment destination, it was clear that fiscal correction and ways to boost foreign investment would be high on his agenda in this year’s Budget and this has been reflected in the Budget speech.
I am in agreement with the FM when he said that India should aim for higher growth that will lead to inclusive and sustainable development of the country.
The Budget seems realistic and credible and is a sincere attempt towards achieving fiscal consolidation with heavy emphasis on the infrastructure sector.
Containing the fiscal deficit at 5.2 per cent is commendable; this, coupled with a projection of 4.8 per cent deficit, for FY 13-14 seems achievable. The subsidies in the petroleum sector are gradually diminishing, food and fertiliser subsidy, too, are at reasonable level. There is an honest attempt to bridge the gap to the extent feasible, for which the Finance Minister and his team deserve compliments.
MANUFACTURING PUSH
Capital-intensive manufacturing and infrastructure will get a push on account of introduction of 15 per cent investment allowance -- the validity being till the 2015, it removes uncertainty associated with next year’s budget.
The Budget also focuses on measures that will facilitate corporates to access funds through tax-free infrastructure bonds for which the limit has been revised to Rs. 50,000 crore, extending the sunset for section 80 –IA for two more years too will help the infrastructure developers.
The PPP model for improving domestic coal production, developing ports on the eastern coast of country, tenders for 3,000 km of roads in the next six months, among other things, indicates a clear push towards propelling infrastructure development in sectors like roads, ports, coal mining and power. The Budget has tried to clear couple of grey areas too, specifically GARR, import duty on coal etc. In a nutshell, a series of good interventions to kick start the investment cycle and investor confidence in the infrastructure sector.
The upward revision of import duty, from 1 per cent to over 4 per cent on steam coal imports will adversely impact the industry as it will lead to increase in the cost of power generation. This is little amusing as the country has huge deficit in coal and the government is trying minimise cost by augmenting coal supply through various initiatives for domestic production as well as opting for price pooling of domestic and imported coal.
GST INITIATIVE
Steps towards implementation of GST will help the trade. It will make taxes uniform and can also help to reduce prices. The Budget has made a provision of Rs. 9000 crore towards this, which indicate clear intent for implementation. Today, some consumer goods are not launched in certain markets where the VAT rates are high as it would increase prices. GST in away will also boost consumption. It will help us to plan better and can even boost profitability of our consumer goods portfolio, specifically edible oils. The progress on DTC and promise to introduce the same incurrent Budget session too is a positive development.
Overall, this Budget can be termed a moderately populist one as the FM has tried to address majority of the issues faced by the common man and it has also shown the softer side of the United Progressive Alliance by announcing gender sensitive schemes, especially for women.
I sincerely hope and wish that this budget will steer the growth of the economy upwards and India into a phase of renewed growth trajectory.
(The author is Chairman, Adani Group.)