I thought the Budget Speech and the budget proposals were, by and large, welcome. In a pre-election Budget the Finance Minister has managed to balance political imperatives well with the economic needs. The emphasis on the social, education and rural sectors is welcome as it will create both short term as well as long term advantage. We need to ensure that the outcomes on these expenditures match the outlays. I was particularly enthused by the emphasis on rural water supply and sanitation and on women and child development.
It was good to see that both the revenue deficits and fiscal deficits in both the current year and next year will be well under control. The best feature of the Budget is the decision to reduce the CENVAT rate from 16% to 14 per cent. This will provide the much needed fiscal stimulus to the economy especially at a time when the global economy is expected to slow down. It is also an anti inflationary move. The decision to allow a set off to dividend tax paid on dividends received by a corporate against the dividend tax on the dividend paid is an excellent move to avoid double dividend tax. Many of the moves in the Budget indicate that the finance minister is on track for introduction of a uniform goods and services tax by April 2010 which, in my view, when implemented will lead to an increase GDP growth rate by 1 to 2 percentage points.
The writer is Chairman, Godrej Industries