This is a very balanced budget under very difficult circumstances. Our fears that there might be large rollbacks of stimulus measures have proved to be unfounded. Instead, the Finance Minister has laid out a budget to encourage growth. Let me explain.
Firstly, the FM has given a spurt to the growth drivers of the economy. With his carefully synchronized concessions on the income tax front, he has left more money in the hands of people and this will give a boost to consumption demand. The hike in allocations for NREGA, Bharat Nirman, infrastructure and other social sectors will create multiplier effect on the domestic market. Hence investment should also rise on the back of growing demand. The FM has also reduced surcharge on corporate tax which should leave more funds with firms.
Secondly, even though India's financial sector has not been affected by the global financial meltdown, Mr. Mukherjee is not complacent. He is trying to beef up India's financial architecture to give it more resilience. He has proposed setting up of a Financial Stability and Development Council, which will look into and monitor financial prudence.
Thirdly, the FM has addressed a major challenge before the Indian economy i.e. increasing agricultural production. In fact this is the medium to long term solution through which the country can tackle the endemic problem of food price inflation. He has recognized the fact that the long term solution to food inflation lies in radically augmenting the food availability domestically in the face of rising demand: because given the shooting global prices of agricultural commodities imports no longer offer an option for stabilizing domestic prices.
Yes, there are disappointments. The Finance Minister has chosen to raise the MAT rate. But overall, I suppose, this is a good bargain. The budget on the whole is evidently forward looking and pins its hopes on growth and placing India on a double digit growth path.
The writer is the Secretary General of Federation of Indian Chambers of Commerce and Industry (Ficci).