The Finance Minister has taken a practical approach to the budget, given the macro-economic conditions and various other constraints that the government is grappling with. The budget has focused on some key social issues and there is a welcome emphasis on gender equality and the disabled. Improving support for women, youth and the poor is laudable.
Reading the fine print of the Union budget, I feel the Finance Minister has done a balancing act of standing by his commitments to keep the fiscal deficit in check and preparing an inclusive budget in an election year.
Some of the positive takeaways are: steps to increase financial savings through inflation-indexed bonds that will provide an alternative to gold investments as an inflation hedge and help improve the trade deficit; incentivising investment in new plant and machinery through investment allowance deduction; and steps in the infrastructure sector like the announcement of a regulatory authority for the road sector, new ports and industrial corridors and a commitment to announce policies to encourage hydrocarbon exploration and production of shale gas.
While the proposals don’t talk about big-ticket reforms, they show the intent to stay on the growth path and ensure stability of the tax structure.
The 12th Five-Year Plan calls for infrastructure investments to the tune of $1 trillion with 47% private participation. Given that government and private sector companies are under some financial stress, it is imperative to attract foreign investments to fund India’s infrastructure expansion needs.
The commitment to improve infrastructure in the food supply chain will help the agriculture sector.
Also, though, the Finance Minister has stuck to his fiscal deficit target of 4.8 per cent, the revenue projections seem optimistic. Broad-basing tax coverage and curtailing non-plan expenditure would have added more credibility to the fiscal deficit forecasts.
While the Finance Bill is a major stimulus for the economy, the Finance Minister seems to have retained options to exercise further measures through the passage of some of the key bills pending passage through Parliament.
(K. Venkataramanan is the MD and CEO of L&T.)