The Union Budget for 2014-15 is a pragmatic, progressive and welfare-oriented document. Acutely aware of the fiscal constraints, finance minister Arun Jaitley has stopped short of making any flamboyant announcement or populist measures and has instead focussed on a number of nuts and bolts to augment growth. The budget has been bold to keep the fiscal deficit target at 4.1% of GDP and if the government adheres to this aim without any below-the-line changes or spending cuts, it will boost India’s credibility globally. Given that the new government took charge just a little over a month ago, the plan is to first rightly assess the prevailing economic situation, act on specific areas and key themes and perhaps prepare the ground for sizeable changes when the next budget is tabled in February 2015.
There have been some definite moves in areas of sanitation, power generation, inland waterways, road construction, low-cost housing and slum redevelopment. While the budget did not do away with retrospective taxes, the finance minister has assured the investor community in no unambiguous term that the government is committed to providing a stable and predictable taxation regime that would be investor-friendly and spur growth. The 10-year tax holiday to power generation companies and 15% allowance to manufacturing companies investing in plant and machinery are key positives for the industrial sector. Importantly, the threshold for this incentive has been cut to Rs. 25 crore from Rs. 100 crore and gives the much-needed boost to small entrepreneurs.
The increase in insurance FDI will propel growth and address supply-side constraints.
There have been number of other small yet significant changes including decision to hike both 80C and income tax exemption limits. While tax breaks will leave more money with individuals, changes pertaining to the capital market will usher in the much-needed operational efficiency.
For Budget 2014-15 to be successful, implementation on ground will be the key even as it has set the tone for more changes in coming years. We can now expect a bolder and visionary document when Budget 2015-16 is tabled in little under eight months from now.
Sunil Godhwani is CMD, Religare enterprises