Going into the first full-fledged Budget of the Modi government, expectations were running high, almost as if one Budget will address all the lingering problems of the economy. Of course, it was not to be. However, in my view, the Budget has been reasonably good in several regards. First, it is growth-enhancing in the near-term, given the relaxation in the fiscal consolidation road map and this is done with credible fiscal math – something which has been missing in the previous Budgets. Modest relaxation in fiscal targets should not upset ratings agencies or monetary policymakers because, first, inflation risks are very contained and second, extra spending is going in the area of infrastructure (especially roads, railways) which is capacity augmenting. Indeed, setting up of National Investment Fund, which can raise capital for financing infra-spending and revisiting the PPP model showcases the government’s commitment to drive infrastructure sector.
From the medium term perspective, the areas which are accorded high priority (apart from infrastructure) are GST implementation, direct benefits transfer through Jan Dhan Yojna, addressing the issue of black money, and enhancing ease of doing business. As regards GST, the FM has responsibly made provisions for GST compensation to states, given that the GST Amendment Bill is already in the Parliament. Further, he is sticking to the deadline of April 2016 for the roll-out of the GST.
Equally encouraging is the fact that the government is making swift progress on Jan Dhan (which has already covered 125 million families) and cash transfers have already started in the case of LPG subsidies. Perhaps, food subsidy could be the next area, as ultimate aim of the government is to provide leak-proof social benefits to people of India.
Right from day one, this government seems to be committed to enhancing ease of doing business and this is very much part of ‘make in India’ and ‘minimum government, maximum governance’ initiatives of the prime minister. The FM talks about setting up an e-business portal, which would integrate several regulatory permissions in one source, plan to introduce a resolution of disputes bill, to streamline institutional arrangements for resolution of disputes pertaining to government contracts. This
should reduce cost overruns and delays in infrastructure projects.
In’addition, giving a roadmap for corporate tax reduction over four years and fixing the inverted duty structure (example for electronics industry) are moves that clearly show that the government is taking a holistic approach to ‘Make in India’ – which is infrastructure improvement, tax incentives, and skill enhancement.
On the issue of black money, the finance minister plans to introduce a ‘benami bill’, which would confiscate ‘benami property’ and provide for prosecution. The aim is to ensure that real estate transactions come under the tax net.
Apart from these focus areas, there are several other areas that deserve mentioning. There is a clear effort to boost financial savings in the country through tax incentives for health insurance, pension. Sovereign gold bond is also aimed at reducing the allure of physical gold and encouraging financial savings. This could bring a lot of unproductive savings into main stream. Secondly, the FM stated that the process of formalising a new monetary policy framework is complete and he would be looking to set up a monetary policy committee, much on the lines of the central banks in the West.
In the coming year, the government is also looking to bring in a bankruptcy law (as per global standards). This is a long-awaited reform and structurally positive.
An area where the Budget has disappointed is that not much attention has been paid to the PSUs’ recapitalisation (provision for recapitalisation is quite inadequate). Also, the issue of stressed assets, such as gas-based projects, has not been addressed properly. Another area where a lot could have been done was in the affordable housing segment. The FM was surprisingly silent on this.
Still, in all, a lot has been achieved in this Budget. It holds the promise of a lot to come in the coming years. It is a process of nation-building and, therefore, the journey cannot stop with one Budget. I remain a lot more positive about the intent of this government, which is clearly committed to taking India to the double-digit growth path and I see that in every action they are taking. We can only complain about pace, but surely not direction and intent. ♦
chairman, Dr Reddy’s Laboratories:
The Budget is a clear one, with a focussed growth trajectory for the next 3-4 years, in line with the expectations of India Inc. The significant outlays on infrastructure (?70,000 crore) and power projects that will provide a much needed additional 4k MW, are in the right direction towards revitalising the investment climate in the economy.
Kiran Mazumdar Shaw
chairperson, Biocon Ltd: “FM’s speech was clear and compelling showing a positive roadmap for the Indian Economy. However, I expected more for the implementation of the flagship ‘Make in India’ programme. The ‘Skill in India’, ‘Swachh Bharat’ and a new fund for start-ups is a welcome move; however, I expected more enabling provisions that would encourage investor funding.
chairman, Wock- hardt Ltd: The Budget provides direction, a way forward and vision of the development agenda of the government. Collectively, many steps taken together, gives me confidence and comfort that we are on the right track for the next five years. India will grow and grow fast, likely to be 10 per cent GDP growth