The run-up to the Budget was characterised by a high degree of optimism and an expected turnaround in the growth trajectory. The Budget is a positive one, with a long term vision on equitable growth and job creation.
The ingenuity of this Budget lies in the government's intent to manage cash flows into the economy without merely resorting to increasing taxes. The Budget is banking on scaling up of infrastructure and plugging leakages in subsidies and direct transfers to fuel growth. It is betting on a near double digit growth for sharper revenue spikes and divestment of ailing PSUs to fund key infrastructure projects.
The devolution of a higher share of Budget for improved and smoother cooperation between the centre and the state Governments is certainly a good move towards empowering the states to solve their own unique problems.
The 'JAM Trinity' (Jan Dhan, Aadhaar, Mobile), while reducing leakages in subsidies, will certainly improve disbursement and hence provide impetus to consumption expenditure.
Increasing public expenditure and re-energising the PPP model for infrastructure development are welcome steps. They are aimed at addressing the urgent need for infrastructure development in the country. The additional thrust on infrastructure will ensure that millions of people are gainfully employed and thereby also grow the consumer and consumption base.
Another positive measure is fostering entrepreneurship and encouraging growth of SMEs in the country. This combined with the government's focus on 'Make in India' would give a fillip to domestic manufacturing. The thrust on increasing agricultural productivity and farm incomes could also be a boon for food manufacturers.
However, we believe the optimism capital that was so effectively created in the run up to the budget starting with the election has been underutilized. In a consumption led economy like India, one could argue that economic growth depends more on people feeling rich than people being rich. Revision of exemption on healthcare expenses and Provident Fund (PF) is a step in this direction. But this Budget was an excellent opportunity to encourage consumption through some amendments to the taxation laws especially those which impact consumers such as VAT (value-added tax) and excise. Our reading that such measures have been sparingly used.
Increased tax on petroleum and service tax will increase input costs thus impacting consumer prices. The food processing industry, a mere 10 per cent of the total food industry, is in need of a significant push from the government. We are hoping that this will be taken up in the coming budgets.
But this Budget does provide a clear roadmap and potential for high inclusive growth. The trick now lies in how the government converts this vision into reality by actions on the ground.
(The author is MD, Britannia Industries)