P. Chidambaram brings great credibility to the market. He is that one man in the entire bunch of people who can turn things around. This budget can be described as ‘Budget in Motion’ and did not bring in any surprises or changes in order to gain the confidence of investors, thus creating a continuity of steps taken by him since he took over as Finance Minister last year. We cannot afford to ‘miss’ any FII or FDI in this situation where we have current account deficit under such challenging times. It is very bold and futuristic for sustainable and inclusive growth to overcome the fiscal deficit.
This budget is, in fact, a good one, aiming to improve the economy with strong focus on infrastructure and rural development and with stress on women, youth and the poor, who constitute a majority of the population. Further, the Finance Minister is investing in sectors such as coal to generate more power on the public-private partnership mode. Also, by increasing the ‘logistic’ efficiencies, he aims to generate more employment opportunities in rural India. This aims to reduce the gap between ‘revenue and expenditure.’
According to him, he can’t curb capital expenditure because that is the only thing that can boost investor confidence. To achieve this, he has taken the bold measures like investment allowance of 15% on capital expenditure (plant and machinery), and that is a real boost to the future investments to achieve inclusive growth.
In the automotive industry, there is positive news for the new investors who can enjoy ‘investment incentives’ of 15% of the value of plant and machinery, in addition to the depreciation. On the other side, there is concern at raising the rate of excise duty from 27% to 30% on SUVs. However, considering the growth of the SUV market, this increase may not drastically impact the industry. The increase in customs duty on luxury cars and motorbikes seems to be an effort to raise more revenue, encourage local manufacturing and generate more employment opportunities. The proposal to increase duty on second-hand vehicle from 100% to 125% is a right step. It conveys that India is not ready to accept old vehicles from other countries.
The bottomline is that industry wants Mr. Chidambaram to boost growth, remove inordinate delays in projects and convert populist sops into targeted expenditure. “If you put the stalled projects and the falling economic growth as shown in the pre-budget Economic Survey, you can put the [economic] picture together,” he added.
Given that, the future growth target of 6-6.5% is sustainable, solid and achievable. Without compromising on populism in an ‘election year,’ it is commendable.
(Sunil Rekhi is Chief Financial Officer, Nissan Motor India Pvt. Ltd. He has over 25 years of experience, 15 years of which have been in the automobile industry.)