An inclusive Budget
The Finance Minister has done a commendable job in balancing political, social and economic compulsions in this budget. Riding on the back of a robust growth rate he has focused on inclusive growth with initiatives in sectors like education, rural housing, roads, drinking water, health and agriculture. Recognising the move towards knowledge based future, the budget provided for the creation of new skills training institutes, IIT’s and Indian Institutes of Science. This is a welcome move forward.
He has shifted focus from outlay to outcome. Monitoring and efficient administration of the various schemes will be critical to effective implementation of these programs.
He has provided growth impetus to several key sectors, especially power, healthcare and pharmaceuticals. The continued focus on infrastructure projects like the national highways and the UMPPs is critical for economic development.
By raising the personal income tax exemption limits and rationalizing the tax slabs, Chidambaram has ensured that the common man has a higher disposable income.
This will result in increased demand and will stimulate growth.
Good infrastructure is a pre-requisite for economic development.
The emphasis on national highway development programs and on irrigation and water management projects will boost the manufacturing and capital goods industry.
In keeping with his commitment, the finance minister has continued to pursue the process of reduction of the excise duty. However, reduction of peak customs duty on project imports will further adversely affect Indian manufacturers from artificially priced Chinese competition.
The decision to eliminate the cascading effect of dividend distribution tax is a step in the right direction. The finance minister’s intention to widen the market for corporate bonds, currency and derivatives will provide an additional avenue for funding the infrastructure sector.
The finance minister has managed to keep the fiscal and revenue deficits in check and has created an effective tax administration that has increased collections significantly in the last few years.
This budget recognises the reality of large capital inflows and aims to monitor them without moderating them. This is necessary to contain inflation without affecting the rate of growth.
(AM Naik is the Chairman and Managing Director, Larsen & Toubro)