With this budget, the finance minister has set the ground for repair of the economy. Given the backdrop of a challenging economic situation, the budget has been impressive as it sends positive signals to investors, consumers and entrepreneurs.
There has been a mix of both short-term and long-term measures to boost confidence of all key constituents. Industry had high hopes from this budget, especially with respect to a clear course of action to end tax adventurism.
The government has tried to address this by promising to not to change any of the tax provisions retrospectively, which creates a fresh liability and committing to provide a stable and predictable tax regime that will be investor-friendly and spur growth.
There has been a strong thrust on manufacturing and employment generation. The government has lowered the eligibility limit for investments to get the benefit of investment allowance from Rs 100 crore to Rs 25 crore. This will give encouragement to the SME sector and give a boost to overall capital formation. Further, the announcement to enhance the composite cap of foreign investments in defence and insurance sector will send a strong message to the global investor community.
The budget also contains measures to tackle food inflation in the form of establishment of a price stabilisation fund and a commitment by the Centre to work closely with states to re-orient their respective APMC acts to provide for establishment of private market yards/private markets. We also see a series of steps such as introduction of soil health cards, setting up of agri-tech infrastructure fund, launch of a technology driven second green revolution including “protein revolution” and a greater focus on irrigation.
Ficci has advocated many of these measures as these are geared towards improving agri-productivity and provide lasting solution to food security.
To enhance the capital base of the banks, the finance minister indicated that the same will be raised by increasing the shareholding of the people in a phased manner. This will give a boost to retail investor participation in the stock market. There has been a clear indication to consider consolidation of PSU banks, while granting greater autonomy with greater accountability. This is a positive step towards strengthening the sector.
The minister has displayed adequate fiscal prudence through better expenditure management. The promise to link MNREGA with asset creation and agriculture, and formulate a new urea policy are in line with Ficci’s suggestions.
Setting up of a expenditure management commission to review operational efficiencies of government expenditure is a welcome step.
The budget also provides special impetus to the housing sector which is known to be a propeller of growth. Several measures have also been announced to boost the infrastructure sector. Prominent amongst these is the setting up of new airports, ports, industrial corridors and an institution to support mainstreaming of PPPs. Support measures have also been announced to make available long term capital for financing such projects including setting up of Infrastructure Investment Trust. Significant spending on infrastructure will help in meeting the goals of pushing growth and creating jobs.
The finance minister presented the budget in a very difficult situation and what we have is a set of progressive announcements that will be the key building blocks for engineering a turnaround in the growth trajectory over the next two to three years.
Birla is president, Ficci