Union finance minister Arun Jaitley has presented a budget that takes forward the big themes that have been shaped by the government under Prime Minister Narendra Modi’s leadership: achieving high growth and job creation by enhancing ease of doing business and removing barriers to investment; and empowering all Indians to participate in this growth process. The government has set aspirational goals for the 75th anniversary of our Independence in 2022, with growth backed by good governance as the means of achieving them.
The budget has given a strong push towards catalysing a revival of the investment cycle through fiscal spend, public sector investment and the proposed national investment fund. This will clearly meet the immediate imperative of rebooting the infrastructure sector. At the same time, it has laid the foundations of an institutional framework for sustainable private sector participation in the sector through the “plug-and-play” model for ultra-mega power projects, which could be extended to roads, where all the necessary enablers would be in place before a project is actually awarded. The proposed corporatisation of public sector ports is a welcome move. The emphasis on a cogent regulatory approach across various infrastructure sub-sectors and the proposed legislation for resolving disputes in public contracts would go a long way in ensuring the healthy growth of infrastructure. The measure to introduce tax-free infrastructure bonds would help generate additional resources for the sector.
On the fiscal side, the budget continued to focus on fiscal prudence. The focus on well-directed subsidies and benefits with minimal leakage through direct benefit transfers is very welcome. The greater devolution of tax resources to the states is a major step that would empower states to craft projects and schemes independently, bringing about greater flexibility and ease of execution combined with greater accountability to the people. At the same time, the minister has recognised the need to boost growth and combined prudence with pragmatism in articulating the fiscal path.
The budget has set out a number of important institutional reforms. These include the comprehensive bankruptcy code; the formalisation of the monetary policy framework with an inflation target below 6%; the establishment of the public debt management agency; and the creation of a sector-neutral agency to address grievances of financial sector customers. These are all important elements of the robust institutional framework that is needed to support a modern, developed and fast growing economy.
As expected, ease of doing business was a major theme of the budget and comes through in the measures proposed in a range of areas. These include the measures on infrastructure and bankruptcy resolution mentioned earlier. The proposal to examine the possibility of starting a business without prior permission in accordance with clear policy guidelines would be a path-breaking move towards maximising the benefits of India’s entrepreneurial energy. The proposal for dedicated commercial divisions in high courts is also a welcome move. The tax proposals, such as pass through status for alternate investment funds and postponement of GAAR implementation, are focused on creating a tax regime with more predictability, less scope for discretion and interpretation, improving ease of compliance and reducing litigation.
The budget contains a number of positive measures for the banking sector. The overall focus on growth itself will greatly benefit the sector; as the key providers of finance to infrastructure, banks will benefit from the measures regarding regulation and dispute resolution in the sector. The bankruptcy code would also change the landscape for resolving corporate distress in the country. The comprehensive move being planned towards direct benefit transfers to bank accounts will engage more and more people in the formal financial system. A key move that would have a powerful positive impact is the proposal to incentivise credit and debit card transactions and move towards a cashless economy. The easing of permanent establishment norms for fund managers will help to realise India’s potential as an international financial centre and leverage the vast domestic financial services and investment opportunity. The focus on monetisation of gold holdings is a very welcome move that will enable banks to intermediate these valuable resources into productive uses.
Since the government took office under the leadership of the prime minister, it has articulated a vision for the nation that is both growth-oriented and inclusive. It has focused not only on the measures for growth, but on the enablers to empower all people to participate in that growth, and build better lives for themselves. This budget, too, recognises that India’s biggest asset are our people — and that this asset must be nurtured. The budget has a focus on education, skill building and innovation. It has articulated the objective of universal social security for all Indians, and backed it up with schemes and tax incentives for pensions, accident insurance and health insurance.
In summary, the budget has taken a number of steps that move the country ahead towards achieving the government’s long-term vision. It has encouraged entrepreneurship, investment and job creation, with a focus on infrastructure and the ease of doing business. It has sought to empower the people of India in terms of skills and financial security. It has articulated important institutional reforms that will enhance the robustness of our economy. It sets the stage for a continuing period of positive change that will result in a transformed nation.
Chanda Kochhar is MD and CEO, ICICI Bank
The views expressed by the author are personal