Budgets are becoming more an indicator of policy orientation rather than unleashing big bang reforms. If we take that charitable view, there is lots that meets the eye. Three themes laid out by the FM on Aspirational India, Economic Development for All and Caring Society raised the expectation for the afternoon. But was there enough to pull the country out this slowdown was the question in our mind.
Farm economy occupied the centre stage for Aspirational India and rightfully so, given the degree of stress that that part of the world is going through. The 16-point agenda is possibly the most comprehensive detailing of policy objectives, that included farm market liberalisation, focus on 100 water stressed districts, solar power usage, village storage system, better marketing of horticultural produce, NBFC & Cooperative Banks getting NABARD refinance for agricultural funding are clear wins.
Wellness, the second pillar of Aspirational India, got an allocation of ₹69,000 crore with emphasis on private/public partnership of creating hospital infrastructure is clearly in the right direction but given the dismal state of health care, this is a sector that could with more focus. Continued focus on Swatchh Bharat & piped water supply with attendant budgetary support again are the right focus.
Education, the third pillar of Aspirational India, needs to deal with an India that by 2030 has the largest working population on the planet. Announcement of New Education Policy is welcome, but content needs to be seen. ECB/FDI for education is positive. Given the capital starved sector and given the opportunity of also making India an education destination in emerging markets, this step is welcome.
FM’s second theme on Economic Development for All was not inspiring. Industrial Development in terms of End-to-End Clearance Portals, Boosting Manufacturing in Electronics, 5 New Smart Cities to manufacture Networked Products were some of the mentions. Clearly more work requires to be done to move India into the global supply chain and the promise of Make in India and potential of high employment remains a distant dream.
Infrastructure development, the second pillar of the FM’s Economic Development theme also went along expected lines. Fast track clearance of road projects, public/private participation in railways, inland water development, 100 more Udaan type airports, and electrification of discom reforms are worthy mention. Very little impetus on real estate sector, which is in deep distress. Again, infrastructure, that creates huge employment and is a crying need for the country could have done with bolder initiatives.
The third pillar of FM’s Economic Development theme, the New Economy had the right sound bytes on AI/ML/fintech/policy on data centre parks/quantum technology. These were policy initiatives but without substantive investment data except Bharat Net, the fibre-to-home initiative which will cover 100,000 gram panchayats at cost of ₹6,000crore, clearly a sound investment.
Caring Society, the third theme of the FM focused on Women & Child as its first pillar. Gross enrolment of girls across all stages of schooling exceeds boys is clearly a worthwhile achievement. Six lakh anganwadi workers now upload nutritional data of 10 crore households through smart phones is supported by ₹35,000 crore allocation to nutrition-related programme is welcome. No manual cleaning of wewers and technology, legislation & funding to support is vital to get rid of this social evil. Culture and tourism again is a big employment generator did not receive the attention that it deserves and neither did climate change where other nations are doing so much more.
Governance was the second theme under Caring Society, and decriminalization of Offences under Companies Act is a laudable move we have long advocated to attract foreign investors. Debt recovery entitlement for NBFCs, privatization of IDBI Bank were some of the noteworthy mentions. MSME, the largest employer by sector was paid lip service with the Factor Regulation Act being announced that will allow NBFC to participate in the factoring market. Financial markets, specifically bond market had some interesting announcement. Enabling credit default swap through netting regulations, deepening market, participation of the Debt ETF are important but may not move the needle. Fiscal Deficit of 3.8% for FY20 is within the allowable 0.5% variation from budgeted 3.3% definitely brought comfort on fiscal discipline. But given the $5 trillion vision, more was expected here.
There was more to cheer for in Part 2 of the budget. Given the slowdown of consumption, reduction of Individual Taxes for income brackets ₹5-15Lacs resulting in ₹40,000cr revenue loss is positive for consumption. Dividend Distribution Tax abolition & lower corporate tax rates for new power generation company as well as 100% tax exemption for sovereign wealth funds in infrastructure & other notified sector along with the earlier announced dramatic reduction of corporate taxes seem to be the right moves. Indirect tax dispute redressal windows, return simplification of indirect taxes and other initiatives in indirect taxes clearly reduces cost of doing business in India and is a plus for the competitive index. However, changes in Non-Resident definition forces many HNW investors to review their India Residency status. This is a loss to the nation from a pool of investors to whom it should be looking to facilitate investments into the country.
Overall, a middle of the path budget for a government that faces strong economic headwinds domestically and internationally. Given that the macroeconomic fundamentals are sound, currency is stable, inflation manageable, commodity prices are low, could it have taken more risks to pull the country out of its growth quagmire? That question does remain.
Ashok Hinduja, Chairman, Hinduja Group of Companies (India)
