Given the GDP growth slowdown to below 5% for two consecutive years, industry was expecting a Union budget targeted at reviving growth and setting in place the framework for generating jobs on a large scale. These expectations have largely been met by the government, which has unveiled a prudent and progressive budget. Taken together, the overall vision in the document signifies much more than the sum of the parts.
Slated to set a strong base for future growth, the budget addresses multiple growth drivers of the economy, including consumer demand and savings, private, domestic and foreign investments, and infrastructure. The adherence to the fiscal deficit roadmap of the interim budget maintains continuity and demonstrates the significance attached to macroeconomic strength. We hope that the actual revenue and expenditure will be closely monitored over the year as the fiscal deficit target of 4.1% is challenging. The announcements of an Expenditure Management Commission and revisiting subsidies indicate that the government would seriously address fiscal consolidation.
Most important, Union finance minister Arun Jaitley offered reassuring statements regarding stability and predictability of taxation while noting the issues of retrospective taxation and transfer pricing. These have greatly revived investor sentiments and set the stage for attracting funds into productive sectors.
Directional change in the economy is envisaged through the high priority accorded to converging manufacturing and infrastructure as key growth drivers. Entrepreneurship, small enterprises, higher education and skill development have received attention, enabling all to contribute to development.
Manufacturing is widely expected to offer jobs to the youth as needed. Hence, a welcome move is to strengthen the sector through industrial corridors, clusters, and specific steps for different sectors. Special emphasis has been placed on sectors of strategic significance such as capital goods, electronics, steel and chemicals through changes to indirect taxes.
MSMEs would be greatly encouraged by measures such as lowering of the investment allowance floor to `25 crore, change in definition and easier access to finance through a fund of `10,000 crore for start-ups, among others.
Under infrastructure, a comprehensive agenda addressing financial access, mainstreaming public private partnerships and individual sectors would boost new projects.
A key accent in the budget is on promoting urbanisation. Low-cost housing will be encouraged through increase in interest exemption limit. FDI has also been incentivised by liberalising its participation in real estate. Also, urban amenities such as water and sewage have been addressed. These would work towards establishment of smart cities to absorb the expected urban population of 600 million by 2031.
Recognising that half of the workforce is dependent on agriculture, the budget aims to productively deploy MGNREGA funds and undertake strong measures for irrigation and water management along with agricultural R&D. Farmer markets are being encouraged out of the APMC Act ambit, while agri-credit has received high attention. Such steps can increase agricultural productivity, but more should have been done for allied activities.
With strong emphasis on services such as media, entertainment and tourism, as well as financial services, a comprehensive growth agenda has been initiated. We look forward to more policy announcements to carry forward the good work of budget 2014-15.
Ajay Shriram is president, CII
The views expressed by the author are personal