No flashy dismantling of woodwork but a gradual hard dribble to the net was how finance minister Arun Jaitley chose to get India’s slowing economy find its goal of higher growth and more jobs.
Security officials guard budget copies at Parliament House as finance minister Arun Jaitley to present union budget 2014-15 in Parliament in New Delhi. (HT photo/Vipin Kumar)
He chose fiscal prudence over grand schemes delivering a strong message in his much-awaited maiden budget: nurse public finances, tame inflation and simplify tax laws; growth, investment and jobs will follow.
In a 127-minute speech, in which he took a five-minute break, sixty-one-year old Jaitley made it amply clear that the transition to a more stable economic state could be painful and paved with short-term shocks.
“The prevailing economic situation presents a great challenge. It calls for a conscious choice to be made by all of us. Should we allow this drift to carry on and watch helplessly? Should we allow our future to suffer because of our indecisiveness? Should we be victims of mere populism or wasteful expenditure?” the minister said Thursday in his budget speech for 2014-15.
The annual budget can raise or shrink incomes.
So, millions of Indians hooked on to microblogging sites, television and radios – as the minister presented the government’s biggest economic policy document of the year.
The minister tried not to disappoint his audience giving top billing to their welfare through a raft of measures aimed at spinning jobs, multiplying income and help families deal with ballooning home budgets.
Salaried class got tax breaks, the young — who were instrumental in voting the BJP to power — got a skill development plan to smoothen their entry into the job market and for those looking to branch out on their own concessions were announced for both small and large enterprises.
India needs to create some 100 million jobs over the next decade or so if it were to enter the league of developed nations, but risks economic and social disaster if it fails to provide employment to its burgeoning young population.
As India looks to cities for employment and living, a plan to build 100 smart cities was set in motion.
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Infrastructure, one of the biggest hurdles in India’s growth story, was put in the fast lane, with Jaitley setting an ambitious target of building 23 km of highways per day.
Asia's third-largest economy is now in its longest slump for a quarter century and there were heightened hopes that Jaitley’s budget will lay down the roadmap to engineer a quick turnaround.
There was little room to splurge or offer tax giveaways to the industry anyway.
Yet, the cut in excise and customs duty on a host of products that make good such as soaps, batteries, footwear, processed food cement, yarn and computers among others cheaper.
Importantly, the government made clear its stand on the controversial retrospective taxes—it will now be applicable only in genuine cases.
“The sovereign right of the Government to undertake retrospective legislation is unquestionable. However, this power has to be exercised with extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate,” Jaitley said in an oblique critique of the previous government’s controversial policy to impose a “retrospective tax,” which had fuelled fears of an uneasy business environment for foreign companies.
The move initially shook equity markets as investors had expected a complete repeal of the law, but later BSE Sensex vaulted more than 400 points after the tax proposals to give more money in the hands of people and investment allowances to industry soothed frayed nerves.
He also announced a plan to earn about Rs. 43,000 crore this year by selling shares in state-owned firms, slightly lower than Rs. 56,000 crore set by predecessor P Chidambaram in the interim budget in February.
The finance minister raised the annual income tax exemption limit by Rs. 50,000 to Rs. 2,50,000 for men and women, and to Rs. 3,50,000 for senior citizens.
Jaitley gave a stirring account of the UPA’s 10-year record and the precarious state of public finances he has had to inherit, a hint of which was there in the economic survey presented a day earlier.
The minister, pegged the fiscal deficit — a measure of the amount the government borrows to fund its expenses — at 4.1%.
Achche din, it was obvious, will come from good economics.
Watch: FM presents union budget, says slow growth challenging for economy