The Union Budget has been presented against the backdrop of macro-economic challenges relating to growth, investments as well as consumption. Hence, there was a widespread expectation that the new Finance Minister will deliver a growth-oriented budget. Continuing with the focus of budgets of previous years, this budget too has laid emphasis on growth with equity, and at the same time aimed at fiscal consolidation.
The continued focus on infrastructure development is welcome. The ambitious vision of establishing ‘One Nation One Grid’ for electricity and a similar plan for gas grids, water grids, i-ways can transform the economy significantly. The plan to invest over Rs 100 lakh crore in infrastructure over the next five years and involve the private sector in this development through the PPP model is a huge positive. This will have a multiplier effect on accelerating investments, growth and job creation. Given that infra-financing has been a key bottleneck in implementing large scale infra projects, the budget aims to address the challenges by enhancing the sources of infrastructure financing through corporate debt markets, setting up of Credit Guarantee Enhancement Corporation and by permitting investments made by FIIs/ FPIs in debt securities issued by Infrastructure debt fund.
To revive investments, restoring health of the financial sector is a pre-requisite and the Budget has done just that. There is a strong emphasis on strengthening the availability of capital in the economy through specific interventions across a range of financial sources – be it banking, NBFC (Non-Banking Financial Companies), capital market or even foreign investment. Recapitalisation of public sector banks through infusion of Rs 70,000 crore will help address the capital adequacy requirement and with NPA (Non-Performing Assets) gradually on a decline, this would render greater availability of credit for economic expansion.
Likewise, measures like offering of partial guarantee to banks for asset purchases from NBFCs provides the much-needed respite to the NBFC sector and will help improve liquidity in the system. A slew of incentives proposed for deepening the corporate bond market are also positive for enhancing robustness of financial sector.
The intent of the government to examine further liberalisation of foreign investments, especially in sectors like aviation, insurance and media sends out positive signal and we look forward to government action on these proposals.
One of the major concerns of businesses in India has been the high cost of doing business and there has always been a demand for initiating factor market reforms. Finance Minister’s budget speech indicated some strong actions in this regard, especially with respect to moving forward on labour law reforms as well as working with the States to address regulator issues in power sector. Combined with improved access to capital, these additional reforms should help industry in bringing down their costs.
Additionally, the extension of corporate tax reduction to companies with turnover of up to Rs 400 crore would also render such companies more competitive. We do hope that the government would soon extend this tax reduction to all companies. Given that a highly competitive tax regime has evolved globally, this is needed to attract and retain large scale investments.
The Budget continues the government’s focus on enhancing ease of doing business, especially with respect to simplification of tax regime.
The proposals related to interchangeability of PAN and Aadhar for filing of tax returns, pre-filled tax returns, faceless tax assessments, fully automated GST refunds and electronic invoices system for GST are all welcome initiatives.
In addition to these, there has been a continued focus on existing mega programmes of the government such as PM-KISAN, Ayushman Bharat, Industrial corridors, Make-in-India, Start-up India, Swacchh Bharat Abhiyaan, Digital payments, etc. The plan to take some of these mega programmes to the next stage is encouraging and given the successful implementation of such programmes during last five years, the likelihood of achieving new targets over the next five years remains high.
The Prime Minister’s vision of making India a five trillion dollar economy by 2024-25 requires a sustained growth of over eight per cent per year and with effective implementation of announced reforms and measures, reaching that target should not be difficult.