Emboldened by the recent improvement in India’s macroeconomic data and the buoyancy in investor sentiment, the Finance Minister in his budget has laid out a bold and compelling vision for India. By the 75th year of our Independence in 2022, the FM wants every Indian household to have adequate access to housing, means of livelihood, electricity, health, education and social security all of which are indeed creative. A stronger, cleaner and more just India on the anvil seems a reality. It is heartening to see that this vision has been backed by several doable initiatives in the Budget.
A transformational change, subsequent to the recommendations of the Finance Commission, has been regarding the empowerment of States. That nearly two-thirds of the total revenues collected by the Centre and States in India will be with States shows that the development outcomes in future will be driven more by how effectively State Governments are deploying their resources. At one stroke the fiscal space available with the Central Government has been considerably narrowed. Against this backdrop, the FM seems to have made a conscious choice to phase out the fiscal consolidation targets to an extent, and boost public investment, especially in infrastructure. Alongside, much credit must be given to him for achieving the fiscal deficit target for the current year, and for continuing with the medium-term goal of 3 per cent fiscal deficit ratio.
There are several positives in this budget on the infrastructure front — a new fund to leverage financing of infrastructure projects, revitalising of the PPP model to make it workable, offering of investment projects in the ‘plug-and-play’ mode so as to avoid delays, intentions to undertake regulatory reforms, and tax-free bonds — besides, of course, higher outlays for roads and railways. These steps will address both issues that were being faced by the infrastructure sector — delays in clearances and financing needs.
The FM has taken recourse to multiple ways related to the taxation reforms and also provided a clear sight of the kind of changes we can expect over the coming years. Corporate taxation will gravitate towards lower rates and fewer exemptions over the next four years, making it more aligned to the international structures. After a long delay, GST is now set to come into force from April 2016. This time apparently there is a broad level of consensus on this. The decision to abolish wealth tax is a bold and pragmatic one. Investors would also welcome the clarity that GAAR will be applicable after two years and prospectively.
The budget speech mentioned many important financial reforms — formation of the Monetary Policy Committee and formal adoption of the monetary policy framework, bringing commodity markets under the regulatory watch of SEBI and creation of a sector-neutral financial redressal agency. These are most welcome. The FM has also promised to announce steps for moving India towards a cashless economy. With greater financial inclusion and the introduction of payment banks, this would not be too difficult.
As transactions use less of cash and more of technology, that itself will arrest leakages in government schemes, curb corruption and generation of black money. Moreover, the FM has promised to leverage technology and integrated databanks to detect unaccounted income; and new legislations to track down black money. All these measures will be creating ‘Swachh Bharat’ in a different sense.
On the whole, I believe that this is a Budget that paints the government’s long-term vision in very clear and vibrant colours, and then lays out the building blocks towards realising that vision in a comprehensive manner. This is not a budget that should be judged only by the allocations, especially considering the constrained fiscal space that was available to the FM, but by the ideas for rejuvenating growth and meeting the aspirations of India.
Kumar Mangalam Birla is chairman of the Aditya Birla Group
