Opinion A fine balance
On growth and the fiscal deficit,the budget strikes a realistic note
Global headwinds have adversely impacted the India growth story,which is experiencing a slowdown in GDP growth as well as moderating investments. Under these circumstances,Budget 2013-14 was aimed at rejuvenating growth forces and reviving investments. It achieves this feat commendably,keeping fiscal consolidation firmly at the top of the agenda.
The budget places high priority on inclusive and sustained development,with an added emphasis on the vulnerable sections of society. It manages to enhance outlays on critical sectors without placing an undue burden on taxes,propelling growth drivers with multiplier impact. The emphasis on growth as a necessary condition for development is welcome. The budget also addresses supply side issues to contain inflation.
Tax proposals in the budget are reasonable and practical. CII had suggested that indirect tax rates be retained at current levels,even though the industrial slowdown demanded stimulus measures. The budget maintains excise and service tax rates at 12 per cent,and customs duty at 10 per cent. The GST bill is expected to be taken forward,although no date has been mentioned for its implementation.
On direct taxes,key slabs remain stable. The surcharge on taxable personal incomes over Rs 1 crore,as well as other surcharges,will hopefully only be applicable to the forthcoming year. There has also been an attempt to widen the tax base by applying TDS to the transfer of property over Rs 50 lakh,at the rate of 1 per cent. The commodity transaction tax was avoidable,but agricultural commodities are excluded from it.
Investment in infrastructure and industry is vital to growth and has been flagging in recent months. Infrastructure investments have been accorded a special boost through multiple initiatives in financing,regulation and new projects. In particular,the announcement of an investment allowance for new high-value investments of Rs 100 crore in plant and machinery is welcome. The progress in key infrastructure projects such as industrial corridors,ports,waterways and housing will hopefully rejuvenate industry sectors down the line,as CII had highlighted.
The budget takes care to address stressed manufacturing sectors such as textiles,leather and electronics through a series of initiatives. We are happy that the micro,small and medium enterprises sector has been specially targeted through technology and financing,as well as incentives to grow.
Similarly,capital markets have been tweaked to facilitate raising finance,especially from overseas investors. Regulation will be strengthened,while the simplification of procedures will impart comfort to foreign investors.
In the crucial financial sector,the budget promises to ensure compliance with Basel III international regulations and infuses additional capital. Rural and urban housing finance has been given special focus. With additional incentives also announced,low-cost housing could help boost related industry sectors as well. Capital markets have been promoted through the widening of the Rajiv Gandhi Equity Savings Scheme,as also more facilitative policies to encourage the participation of FIIs.
Agriculture and allied sectors that offer livelihood opportunities to a large proportion of the population have received an increased allocation of 22 per cent. Schemes such as the Green Revolution in eastern India and the watershed programme would see higher outlays. Emphasis has been placed on technology and crop diversification as well. Increased agri-credit to Rs 7 lakh crore and extension of the interest subvention scheme for farmers repaying loans on time,will also be welcomed by farmers.
Skill development is proposed to be scaled up to target 90 lakh youth during the forthcoming year. An award of Rs 10,000 is to be offered to students for successful completion of certification courses,which will greatly incentivise enrolment in skill-development programmes,which is crucial for both youth and industry.
In sum,Budget 2013-14 should be welcomed for its realistic and pragmatic contours. We believe it will catalyse the next growth cycle.
The writer is president,Confederation of Indian Industry
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