The finance minister has presented a growth-oriented budget, largely keeping all taxes intact, and aiming to achieve fiscal consolidation through a growth harvest.
This was the Modi government’s first budget after a thumping electoral mandate.
But the finance minister had barely six weeks to prepare a detailed roadmap. The macro economic backdrop was also quite intimidating, dotted with high inflation, nearly zero growth in the manufacturing sector, an uncertain global economy, the spectre of drought and surging oil prices, among others. On top of all this was the need to achieve fiscal consolidation and meet the aspirations of investors and consumers.
When seen against this backdrop and constraints, the finance minister has done a commendable job. He has resisted the temptation to raise the fiscal deficit and accepted the challenge of keeping it at 4.5% this year, going down to 3.6% and 3% in subsequent years. He has correctly identified that today’s deficit is tomorrow’s tax burden.
The budget provides a growth impulse through its focus on infrastructure and manufacturing. For the latter, the small and medium enterprise sector has got special attention. The SME sector contributes half of industrial and services output and employment.
But it is often starved of adequate credit and funding. A venture capital fund of `10,000 crore has been proposed.
The excise relief for manufacturing has been extended. In the infrastructure space, we find several initiatives. These include smart cities projects, new ports, airports, funding for rural roads among others. We also see simplification of investments through real estate investment trusts. All these will have a multiplier effect on economic growth.
The minister dwelt at length on the issue of tax disputes and administrative issues, since these are of concern to investors.
Any instance of retrospective taxation will now get high-level attention, rather than being allowed to meander through a legal process. The avenue of advance tax ruling to prevent future disputes has been made more liberal.
The budget speech also had several reform-oriented measures, especially for the financial sector.
Banks will now have access to long-term funds, without the burdensome obligation of CRR and SLR. The FDI limits in defence and insurance have been hiked. The common taxpayer got relief in the form of higher exemption slabs, and higher limits to park tax-free investments.
The budget has spelt out in great detail a host of measures for the underprivileged, the elderly and those with disabilities.
It is a practical and detail-oriented budget, which conveys continuity and pragmatism.