The new government’s maiden Budget has recognised the current realities, understood the steps to be taken to boost investment and growth, and signalled a clear intention for action. In this context, the Budget comprehensively articulates the government’s approach in a range of areas and seeks to meet the expectations of stakeholders in the Indian economy.
To begin with, the Finance Minister has addressed two key areas where market participants were seeking clarity — the fiscal path and retrospective taxation. On the fiscal side, the Budget retains the fiscal deficit target of 4.1 per cent of the GDP for the current year, which was set in the interim Budget presented by the previous government. The Finance Minister has articulated the objective of bringing this down to 3 per cent of the GDP in three years. He has alluded to a comprehensive review of subsidies, including enhancing targeting of subsidies and their delivery mechanisms.
On retrospective taxation, the Minister has given comfort that the government is committed to a stable tax regime going forward and announced a mechanism of scrutiny before further demands are made under existing retrospective laws. A number of other announcements have been made that take forward long-awaited reforms. The increase in foreign ownership limits in insurance and defence, and the focus on completing discussions on the Goods and Services Tax in the current year are welcome.
The Budget has significant focus on growth. The need of the hour is to address the issues in projects under implementation and idle capacities, to boost output and make these assets productive. In this context, the commitment to augmenting coal production and making coal available to all power plants that have been completed, or are approaching completion, will go a long way in boosting growth, improving corporate cash flows, easing asset quality pressures in the banking system and supporting the next round of investment. The strong focus on infrastructure development is indicated by the measures announced for the development of ports, urban infrastructure, railways, roads, waterways and rural infrastructure and amenities. The ability of banks to raise long-term resources for funding infrastructure without regulatory pre-emption has been discussed for several years, and the Budget takes a major step forward in this regard.
There is an equally strong focus on manufacturing, which is important for growth and job creation as well as reducing our import dependence and boosting exports. Manufacturing has been sought to be developed both through the creation of enabling infrastructure as well as through sector-specific measures. In addition to infrastructure and manufacturing, the Budget has laid emphasis on agriculture and the services sector as well, with a special focus on tourism. Importantly, the Budget lays great emphasis on technology and connectivity, as a means of improving governance and a driver of economic activity.
Overall, the government has taken a number of positive steps, and also set a larger direction in which it wants to move the economy forward. With the direction set, I am sure that the execution will follow, and India’s growth in the coming years will accelerate to its full potential.
