The Telegraph
Friday , July 11 , 2014
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Pragmatic steps to move forward

The budget has made a bold attempt to reignite growth through a bottoms-up approach.

The budget has something in it for all, with primary emphasis on bijli, sadak, pani, makan and souchalay. There are also tax concessions for aam admi class and empowering women.

The budget has also attempted to give a thrust to investment in agriculture and manufacturing. For development of rural infrastructure, the RIDF corpus has been increased to Rs 25,000 crore. Also, Warehouse Infrastructure Fund and Long Term Rural Credit Fund with Rs 5,000 crore allocation has been created.

This augurs well for declining long term investment in agriculture. The MSME sector which provides employment opportunities to 60 million persons and contributes to 45 per cent of India’s manufacturing output has been proposed an allocation of Rs 10,000 crore.

The budget has taken a number of initiatives for the banking sector. The provision to allow banks to issue long term bonds without the precondition of CRR/SLR is a big positive for the infrastructure sector and will alleviate the ALM mismatches on banking book. Bank consolidation is a welcome move.

Setting up of 6 more debt recovery tribunals will provide a thrust to the recovery mechanism of banks.

Also, the move to increase the limits on section 80C from Rs 1 lakh to Rs 1.5 lakh will also provide a boost to financial savings. It may be noted that the household contributes to 75 per cent of total savings.

The budget has announced opening of more IITs and IIMs in the country which augers well for education loan given by banks. Introduction of uniform KYC norms and inter-usability of the KYC records across the entire financial sector may provide big relief to banks and this may act as an enabler for financial inclusion.

The steps to increase the housing loan exemption from Rs 1.5 lakh to Rs 2 lakhs will act as a feel good factor for the aam admi class and provide an incentive to banks to provide more credit to the retail sector.

The new government commensurate focus on infrastructure, will possibly lead to a faster growth in productivity rather than consumption. This will help in a lower and stable inflation regime. This is in conjunction with the recent railways initiative to transport perishable goods in AC compartments will address supply side logistics.