As I reached out for the remote at the end of the Budget presentation, I could not but help think about the daunting task of the FM and the bureaucracy, who spend months preparing for this exercise. As she made her Budget speech, trying to balance the expectations of the common man, industry and keeping India as an aspirational destination for investment through Sabka Saath, Sabka Vikas, Sabka Vishwas credo, it was evident that the task was difficult.
To address the divergent economic needs of multiple sections of society in the backdrop of sluggish growth, a dip in tax collections and slowing domestic demand while maintaining fiscal prudence at the same time, is no easy task.
The hallmark of the Budget was structural reforms in the financial sector. A robust financial infrastructure with adequate liquidity and credit access is the backbone of any economy.
The Budget proposed changes in the banking laws to enable public sector banks to raise funds from capital markets and flexible debt restructuring for the NBFCs. All of this along with looking to enhance professionalism and transparency in the functioning of the financial sector will augment India’s position as an investor destination and facilitate ease of doing business.
The opening up of Government securities to NRIs and FII stake in corporate bonds to 15% is a landmark move, which would provide the necessary depth to the bond market.
While there was no big-ticket announcement on infrastructure or investment outlay that would make one jump in excitement, it has become the norm to expect the impossible in every Budget. India has done some fundamental structural alignments over the past few years; GST being the most important of them all. In most situations like this, the economic growth prognosis will almost certainly be gloomy. The markets have fallen clearly indicating that the sentiment is not upbeat. But is there reason to be circumspect? On the expenditure side, the FM has allocated ₹2.83 lakh crore to agriculture. There is emphasis on warehousing facilities, solar pumps for farmers, agriculture credit facilities and support for horticulture.
The proposed ₹99,300 crore for education will go a long way to impart knowledge and upgrade skills of the workforce of tomorrow. Launch of the National Police University and National Forensic University are novel concepts.
This coupled with the idea of attaching a medical college with each district hospital only proves that the government genuinely believes in creating a caring society and is committed to nation-building at large.
The FM has addressed some other key areas that needed emphasis. Reforms in the banking sector started by capital infusion in PSU banks last year. By raising equity through NIIF, support has been provided to Infrastructure Finance Companies. The government can raise an additional debt of ₹75,000 crore on this equity and this is a large corpus for infrastructure investment. The start-up system will also get a renewed thrust with the exemption period raised to 10 years from 7 and easing the tax burden arising from ESOPs. The scheme for tax dispute resolution with waiver of interest and penalties will encourage closure of long pending tax litigation. But if there is one big move that the new workforce and aam aadmi will benefit from, it is the reduction of personal income tax. This will boost consumption in the economy and offer much needed relief to the larger population in the wake of rising inflation.
The FM has managed to contain the fiscal deficit situation within reasonable levels and the proposed IPOs of LIC and IDBI and the disinvestment of Concor, Shipping Corporation and Air India will bring in the funds to meet the target from disinvestment nearly ₹2 lakh crore. It is a well-crafted Budget and Nirmala Sitharaman deserves credit for having bravely walked the tightrope amidst strong headwinds.
(The writer is Chairman, RPG Group.)
