The Economic Survey ahead of the Union Budget 2013-14 observed that containing the fiscal deficit was key to ensuring a virtuous cycle of growth, accompanied by measures to boost investments, enhance infrastructure, and promote productive jobs in small businesses.
Budget 2013-14 is a practical and well-balanced document that meets these expectations.
With external growth environment still fragile, the onus is on domestic growth drivers to reprise the potential pace of growth that the Indian economy has earlier achieved.
The budget places emphasis on reviving growth as central to the task of inclusive development, with stress on investments and savings.
Keeping the fiscal deficit at 5.2%, below the target of 5.3% set earlier in the year, was commendable and the target as per the fiscal roadmap for 2013-14 has been set at 4.8%. This appears reasonable and achievable.
Other macro-economic fundamentals that have been accorded priority in the budget are the investment and savings ratios, which had flagged in the wake of the economic slowdown.
Household financial savings have been incentivised through liberalisation of the RGESS for equity investments, while physical savings in the form of housing are being encouraged through easier home loans.
Inflation-indexed financial instruments too are being envisaged. These measures should allow families to save more rather than spending on gold, and would also create investible funds for industry.
Investment allowance of 15% for new project expenditure on plant and machinery is an excellent step to build capacity. Several major projects have been announced in the infrastructure space, including inland waterways, roads, and above all, industrial corridors and new cities.
We eagerly anticipate rapid implementation of these projects that we expect would add greatly to demand down the line for industry sectors such as cement and steel.
Within this macro framework, the tax structure has been largely retained. Industry had called for maintaining indirect taxes at current levels, despite the fact that a stimulus was in order given the stagnation in manufacturing.
We are pleased that excise and service taxes have been kept at 12% and that the finance minister has reiterated commitment to speedy institution of the GST.
The increase in direct taxes too is moderate and understandable, including the surcharge imposed on taxable incomes over Rs. 1 crore.
Social sector initiatives for health, education, skill development, social security, etc too are welcome and will promote inclusive development. The budget is a laudable initiative to rejuvenate growth amid challenging circumstances.