The Budget has been presented against conflicting objectives such as the need to return to fiscal prudence, maintaining growth momentum and reducing government borrowing. Given these circumstances, Finance Minister Pranab Mukherjee deserves kudos for adopting a cautious yet pragmatic stance. He has rightly opted for a calibrated and phased approach to withdrawing stimulus measures.
The key positives include the commitment to rein in the fiscal deficit to 5.5% of GDP in FY 2011 and to 4.8% and 4.1% in the subsequent years. The government borrowing programme at Rs. 3,45,000 crore is reassuring as it will not put undue pressure on interest rates or crowd out private sector borrowers. The tweaking of the income tax slabs is also salutary as it will leave more money in the hands of the tax payers, leading to increased consumption and demand. With the reduction in surcharge, the corporate tax now stands at 33.21%, which is another welcome measure. The introduction of long-term tax free infrastructure bonds will help promote investment in the infrastructure sector and will also be an attractive savings instrument for individuals.
For the housing sector, the benefits under Section 80-IB of the Income Tax Act have been extended for a year, which will be beneficial to developers focusing on affordable housing. The extension of the 1% interest subsidy on housing loans up to Rs 10 lakhs and where the cost of the property is under Rs 20 lakhs is welcome. It is encouraging that the government is increasingly focusing on housing shortage. This is reflected in higher outlays for Indira Awas Yojana, focusing on rural housing and the Rajiv Awas Yojana that seeks to cut slums in urban areas.
Finally, the Budget has not disappointed the market.
The writer is Vice Chairman, CEO, HDFC Ltd