The Finance Minister was presented with a tricky set of trade-offs ahead of Budget 2020. On one hand, there are immediate challenges of the slowdown in growth and investments, along with frequent global event risks — including the recent outbreak of the coronavirus. On the other, there are longer-term challenges of climate change, demographic shifts and technological disruptions.
In the limited fiscal room that the government had, the Finance Minister has announced several measures and initiatives to address these challenges and built them around the themes of Aspirational India, Economic Development and Caring Society.
Many of these have an element of continuity from the initiatives taken in the past. For example, the option of migrating to a lower tax structure by forgoing exemptions, that was given to the corporates in September, has now been given to cooperatives and to individual taxpayers up to an income of ₹15 lakh. The latter would boost consumption at the bottom of the pyramid, which is quite crucial in the current economic context. The lower corporate tax rate of 15% for new manufacturing investment companies has been extended to power generation companies as well.
The partial credit guarantee scheme for NBFCs is proposed to be expanded. All these are reinforcements of the proactive efforts that the government has been making to reinvigorate India’s growth story.
The FM has rightly acknowledged the issues that have been hampering the competitiveness of Indian manufacturers in certain areas — including the rising trend in imports from FTA partners. The review of rules of origins requirements under the FTAs, strengthening of the provisions related to safeguard duty and the provisions against dumping are welcome steps to ensure a level playing field for Indian companies.
The National Infrastructure Pipeline envisaging an investment of ₹103 trillion that was announced a few weeks back is going to play the most important role in realising India’s growth potential over the medium-term and in achieving the ambitious goal of a $5-trillion economy.
The Budget has made sizeable provisions to get this pipeline going. Timely implementation of these projects will also require concerted and coordinated actions to expedite clearances, to iron out any ground-level issues and to address sectoral policy concerns that may come up.
Given the slowdown in tax collections and the need to maintain spending in a slowing economy, sticking to the original fiscal deficit targets was always going to be difficult. Still, the FM has managed to limit the deviation from the original deficit trajectory to 0.5% of GDP. The next year’s ambitious disinvestment target — which includes selling of stake in LIC and some strategic divestments — will be helpful in this regard.
Building skills
While focusing on these near-term challenges, the FM has not lost the sight of the long-term, structural issues. The demographic dividend that India has been experiencing currently can be fully leveraged only if we are able to invest adequately in skill-building.
The sizeable provision of almost ₹1 lakh crore for the education sector, along with the steps to get more private sector play and foreign investment in higher education, are exciting. The FM talked of different initiatives to link the skilling programmes to the needs of the employers (including special bridge courses to prepare teachers and nurses for the demand in other countries), which is the right way to go.
On another long-term issue of environment and climate change, India has been playing a proactive role with its early initiatives in the aspects of renewable energy and electric mobility. This Budget — apart from taking some additional steps in these areas — has focused on two additional and increasingly critical aspects i.e. addressing the water stress in one hundred districts and incentivising States for improving the air-quality of cities. These announcements reflect that the government is alive to the emerging concerns.
The Economic Survey this year talked of creating a conducive environment for wealth creation by building trust. One sees a reflection of the same in this Budget — the most prominent being the enshrinement of the “taxpayer charter” in the statutes. Faceless appeals and the introduction of the settlement scheme for direct tax disputes are welcome too.
This overall approach of the government, along with the multitude of steps to nurture the growth-generating impulses in the short-term and to build the competitive core of the economy for the long-term, should help the economy scale back to its earlier growth trajectory — sooner rather than later.
Kumar Manglam Birla is Chairman, Aditya Birla Group
