Multi-pronged measures for revival

The budget was widely expected to bring out a road map for reviving investments, creating jobs and accelerating growth. It has delivered on all counts and finance minister Arun Jaitley is to be commended for a prudent and visionary approach to guide the macro-economy.

By GUEST COLUMN - Chandrajit Banerjee
  • Published 1.03.15
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The budget was widely expected to bring out a road map for reviving investments, creating jobs and accelerating growth. It has delivered on all counts and finance minister Arun Jaitley is to be commended for a prudent and visionary approach to guide the macro-economy.

The finance minister outlined his medium-term priorities through a 13-point agenda for 2022 when India attains 75 years of Independence.

With these clear goals in mind, the budget targeted the key areas of infrastructure investment, putting money in the hands of consumers and providing social security to all citizens of the country.

Investment has been accelerated by pushing back the fiscal deficit target of 3 per cent of GDP to 2017-18. For the forthcoming year 2015-16, the target at 3.9 per cent is reasonable given the need to build up public investment in the infrastructure sector.

Central Public Sector Enterprises are also expected to contribute to the investment pipeline. The finance minister has additionally delineated a "plug-and-play" model for ultra mega power plants where all the government clearances would be approved before the bidding process.

The institution of a National Investment and Infrastructure Fund would encourage the investment revival. We hope that the fiscal space will be leveraged to create additional capital assets, boosting demand for related goods and services.

Industry is greatly encouraged by the finance minister's intention to lower corporate tax rates from the current 30 per cent to 25 per cent over four years.

This would make Indian enterprises more competitive in the global marketplace and impart certainty and stability to the direct tax regime by minimising exemptions and avoiding litigation.

The elimination of wealth tax and its replacement by a surcharge of 2 per cent on incomes of over Rs 1 crore would rationalise the tax structure.

Regarding indirect taxes, the finance minister has reiterated his commitment to the introduction of GST that would add efficiency and productivity to the economy. The CII has estimated that GST could add at least 1 percentage point to the GDP pace and with this double-digit growth could be a real possibility.

The budget also addresses inverted duty structures and anomalies by streamlining customs duty and exemption of special additional duty. This will encourage domestic manufacturing and help create jobs.

A key CII recommendation was to rationalize capital gains regime for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

Sponsors will now be allowed to exit these and rental revenues would be accorded pass-through status. The General Anti Avoidance Rule has been postponed by two years, a much-awaited step. The uncertainty regarding the domestic Alternate Investment Funds, too, has been clarified and this would encourage establishment of new funds.

The strong pipeline of investments, attention to securing the future of citizens and tax changes would place the Indian economy on a firm path to double-digit growth rates in the coming years.

Banerjee is director-general, CII