The message of the Union Budget 2010-11 is positive. It signals prudence and solidity. It confirms that the liberalisation and economic reforms remain very much on the cards. The Budget also conveys the clear agenda of the government to achieve an ambitious growth target — double-digit GDP growth over the medium term.
The move towards achieving an improved fiscal balance is also clear.
In a sense, the Budget also marks a transition point, as the policy focus shifts away from the crisis mode of the past year-and-a-half to the longer-term vision of India as a major global player. The Budget had to juggle multiple concerns and objectives, revving up GDP growth, greater fiscal stability, containing inflation and promoting inclusiveness.
The FM has stressed the need to improve the effectiveness of government institutions and remove the bottlenecks in delivery systems. Perhaps for the first time, the FM has articulated the view of the government being an enabler.
The Budget lays the ground for the economy to achieve a growth of around 8.5 per cent in 2010-11. There is a significant step-up in outlays in areas such as agriculture, coal, roads and infrastructure. Measures such as targeting construction of 20 km of roads daily and introducing competitive bidding for mining of coal blocks will provide significant stimulus. If there is one factor that constrains India’s potential from being unleashed, it is the infrastructure gap. Hence, every initiative aimed at addressing infrastructure is to be welcomed.
Proposal for additional banking licences to private sector is a welcome surprise. One hopes that industrial houses will be allowed to bid for them.
Other positives include sizeable fund allocation for the Tier-I capital of public sector banks, move to rationalise policies governing FDI and increase in the weighted deduction allowance for in-house R&D spending. Another positive is that the excise duty cuts, part of the economic stimulus, have been rolled back only partially.
The raising of duties on crude and the hike in excise duty on petrol is a pragmatic step.
The Budget has a host of measures to benefit the farm and rural sectors — increase in outlays for water harvesting, dryland farming and storage facilities.
The Budget has also announced major initiatives toward fostering inclusiveness. A social security fund is being set up for workers in the unorganised sector. Taking forward the rights to information, work and education, the Budget spells out one more basic right — the right to food.
I believe that this Budget sets the stage for accelerated reforms going forward. Admittedly, some key reforms, such as the introduction of the Direct Tax Code, GST and the Companies Act, have been deferred. But this is understandable. The GST calls for coordination between states. The Direct Tax Code has far-reaching implications and the feedback from industry is still being studied. I believe that if the final legislation is well-honed, the wait will be well worth it.
The writer is chairman of the Aditya Birla Group