Budget 2014-15 sets a strong and convincing template for boosting growth and generating jobs, the twin imperatives for the economy today. Given that the fiscal situation imposed constraints on the government’s initiatives, the finance minister has conducted an admirable balancing act. Budget 2014-15 satisfies multiple sectors of the economy and revitalises investor confidence.
Keeping fiscal deficit at 4.1 per cent and vowing to bring it down to a reasonable 3 per cent in the next two years, Jaitley has nonetheless brought in comprehensive measures across all sectors of the economy, including agriculture, infrastructure, manufacturing and services. Overarching themes such as long term financing, boosting small savings, promoting urbanisation and addressing human development have found place in the budget.
Industry is particularly happy that many of its recommendations have been accepted. The CII expected personal income tax slabs to be raised, and this has been increased to Rs 1.5 lakh which will boost savings. Transfer pricing was addressed strongly in the budget to add to investor sentiments. The Goods and Services Tax (GST), which would bring in much needed integration to the Indian markets, remains on the government’s priority agenda and we hope that the remaining issues would be speedily resolved.
Several anomalies in the duty structure pointed out by the CII were addressed while certain sectors like solar energy, telecom equipment, chemicals and steel benefit from tweaking indirect taxes. The FM’s assurance of a stable and predictable tax regime greatly reassures industry and would encourage investments.
The CII had called for a range of initiatives to boost entrepreneurship and the micro, small and medium enterprises sector (MSME). A start-up fund of Rs 10,000 crore, bringing more units under the definition of MSME, and exit policy are some of the new initiatives.
The budget assures foreign investors that their concerns are being addressed. It increases FDI limits in defence and insurance, and permits FDI in e-commerce. FDI is also being encouraged to participate in the smart city projects and urban development. This sends out a strong signal that India is open for business and would attract funds into critical sectors.
Manufacturing has been linked to urbanisation in a strategic manner. Cities would not only be set up along industrial corridors and be linked through transport connectivities, but are also anticipated to improve municipal working, address drinking water and sanitation, and enjoy public transport facilities. Low cost housing, real estate investment trusts, and foreign participation have received a boost. New IITs and IIMs have been announced for different cities, while textile clusters and industrial clusters would be strengthened in others. This is the route to a modern India and we hope that such measures would feed into a landscape of smart, clean and livable cities that generate high employment and productivity.
The tourism sector which offers many employment opportunities has received high attention, relating to easier visa regime, setting up of tourist circuits, funds for heritage and archaeology, etc. All these should bring in more tourists and increase dollar inflows besides promoting India's culture and heritage.
The power and energy sector is another area which has been strongly promoted. Coal linkages, rural power and renewable energy have been addressed while extension of tax holiday and lower duties on inputs would add comfort to power producers. However, no targets have been announced for generation capacity or reforms in state electricity utilities.
Banerjee is director-general, CII