The Union Budget 2015-16 takes full advantage of the confluence of favourable factors helping India’s economy. Among them are low crude-oil and commodity prices, low inflation and a sound current account. GDP growth in the financial year 2014-15 will be 7.4%, making India one of the fastest growing economies in the world.
As the finance minister put it, “The credibility of the Indian economy has been re-established.”
The budget will help propel the economy onto an 8%-8.5% growth trajectory, while enabling the medium-term fiscal target of 3% of GDP to be achieved, albeit with a delay of one year.
Infrastructure is the big push area with spending in 2015-16 pegged at `70,000 crore higher than in the previous financial year. And this in turn will translate into higher growth in the corporate sector. That is the clear strategy.
The proposal to set up five ultra mega power projects of 4,000 mw each in the plug-and-play mode is novel. This should help draw more investors and reduce the project-cycle time significantly. If it works, this could be extended to infrastructure projects in other sectors as well.
A number of steps to revive the industrial and services sectors have been set afoot which include steps to promote start-ups, and streamline the process of regulatory approvals. Other positive measures include the corporate tax rate cut from 30% to 25% over the next 4 years, and the abolishment of wealth tax.
The budget also includes measures aimed at improving the ease of doing business such as streamlining processes to resolve disputes, and a two-day time frame for excise and service tax registrations.
It is also a ‘green budget’ with ambitious targets for renewable energy generation, and the exemption of common effluent treatment plants from service tax.
The bond markets being strengthened through the establishment of an agency for public debt management, the expansion of postal sector’s role in banking, and the discouragement of cash-based transactions are some innovative initiatives for the financial sector.
The budget also addresses skill development and social needs. Along with loans for higher education to be stepped up, and primary schools to be upgraded, a big push is also being given to establishing more institutions of excellence for higher education.
The push to set up a framework for universal social security, through enabling low-cost insurance policies is welcome.
The budget will bolster growth in every way.
Kumar Mangalam Birla is the Chairman of Aditya Birla Group