Overall, the Budget appears to be modest. It recognises the need for consolidating the country's financial status and providing economic stability. There are some positives. At the same time, there are some more points that will present challenges and, hence, need to be observed in greater detail.
It is good to see agriculture get its continued focus, with the total plan outlay increasing by 18 per cent. There are also some worthwhile moves such as fillip to increase self-sufficiency in urea production in the next five years within India itself, and encouragement to use single super phosphate.
Micro-irrigation has got a boost this time around, with greater commitment of funds in that area. There is also a warm gesture to put more money into the farmers' hands by having increased the agriculture credit from Rs.4.75 lakh crore to Rs.5.75 lakh crore.
Infrastructure should also look better, thanks to the huge outlay in the areas of power, roads, ports, civil aviation and the like. This will be propped up strongly by the doubling of infrastructure bonds to Rs.60,000 crore this time.
The Finance Minister has paved the way for more liquidity to be pumped into the system, by re-capitalisation of PSU banks to the extent of Rs.15,800 crore. He has also made it easier to source funds by facilitating greater access to ECBs at lower rates. Foreign exchange will also get a positive impact by way of curb in gold import.
However, the increase in taxes will have a cascading effect on the overall costs and this will impact inflation. The common man is given very little concession by way of direct taxes.
A similar effect will be seen on the manufacturing sector, with increased service tax and excise duty.
Whether the GDP growth target of 7.6 per cent can be achieved or not, is something which one will have to wait and see. The GDP growth will have to be supported by growth in other sectors such as the service industry and the agriculture sector.
One will have to wait and see the government's progress in implementing reforms such as the DTC and the GST, and also whether the fiscal deficit target of 5.1 per cent (which has itself been revised downwards from 5.9 per cent) can be reached.
(The author is Chairman of the Murugappa Group)
