It is important for us to stay on the path of fiscal consolidation to reap the benefits of better growth prospects.
The Finance Minister, P. Chidambaram, has achieved a difficult balancing act by presenting a Budget that has contained the deficit while also meeting necessary expenditure. After several years in which the fiscal deficit continued to increase, it has been contained at 5.2 per cent of gross domestic product (GDP) in the current year, well below 5.7 per cent in the previous year. The rising deficit had become a hurdle in the path of higher growth, as it kept interest rates high and prevented the central bank from easing monetary policy. It is important for us to stay on the path of fiscal consolidation to reap the benefits of better growth prospects.
It is widely accepted that India’s growth potential is far higher than the 5 per cent achieved in the current year. To achieve that potential, the Finance Minister has attacked the hurdles to growth from various fronts. First, he has accepted some of the recommendations made by the industry in terms of providing incentives for re-starting the investment process. Second, he has dealt with some of the hurdles in the infrastructure sector. The steps taken to simplify procedures for foreign investors and to develop domestic capital markets are aimed at this. Incentives have also been given to encourage household investment in financial instruments. The government has set an ambitious target of nearly Rs.56,000 crore for disinvestment proceeds. This needs to be achieved with a judicious distribution of issues throughout the year.Industry has, for some time, been waiting for the implementation of the Goods and Services Tax (GST). It has been held up due to the lack of consensus among State governments. Mr. Chidambaram has raised our hopes that consensus will be reached soon and the tax will be introduced. Industry will also take advantage of the 15 per cent investment allowance.
Adi Godrej is Chairman of Godrej Group and President of CII