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Direction set, execution holds the key

The finance minister’s maiden budget is more directional in nature. Several reformist measures have been announced — the road map for fiscal consolidation to reach 3 per cent by fiscal 2017, sorting out all issues related to GST (goods and services tax) by the end of the year, controlling non-planned expenditure and establishing stable and a predictable tax regime.

A lot depends now on the implementation of the road map.Coming to specifics, the task of achieving the target of 4.1 per cent fiscal deficit is indeed challenging, given the current state of the economy.

However, increase of planned expenditure to Rs 5.75 lakh crore indicates to channelling of taxpayers’ money for productive purposes.

The increase in FDI level in insurance and defence was a low hanging fruit and should bring in some money to these sectors.

It is heartening to note that the government recognises the importance of the public-private-partnership (PPP) model in the infrastructure sector. However, specific initiatives are needed to boost the investments through the PPP model, which are yet to be announced.

The proposed allocation of Rs 37,880 crore for investment in central and state roads should provide impetus for roads. The announcement for awarding 16 new ports and smaller airports in the PPP mode should augur well for these sectors.

The announcement of Real Estate Investment Trusts (REITs) type structure for infrastructure projects would facilitate portfolio churning for developers.

While the regulatory relief announced for banks in the form of lower SLR, CRR for infrastructure lending is a positive step, it is necessary to provide a similar kind of relief to infrastructure finance companies (IFCs), who operate in this sector.

The budget also provides some relief to the common man in the form of an increase in the exemption limit in income tax, increase in exemption under section
80C and also housing loans for self-occupied properties.

One of the steps for boosting the manufacturing sector, in the form of investment allowance for investments over Rs 25 crore will benefit the small and medium enterprise (SMEs) significantly.

The finance minister has also tried to address the supply side bottlenecks and the burgeoning inflationary situation by establishing a price stabilisation fund, which would strive to mitigate the risk of price volatility in agricultural produce.

The plan to invigorate warehousing sector should improve the distribution of food grains and enable tackling inflationary pressures.

Overall, the budget is a decent exercise given the fiscal constraints and the short time available with the new government.

 
 
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