The Economic Survey presented on the eve of the budget confirms the robust growth of the Indian economy. In fact the outlook for the next year is even stronger with greater improvement in savings and investment ratios. With such a favourable wind at its back, it was but natural that the finance minister had a heavy burden of expectations to deliver in his budget speech. He was also presenting the well-known budget in the context of high food inflation which has been ongoing for the last two years.
The finance minister Pranab Mukherjee has delivered both on a pro-growth expectations as well as an anti-inflationary trend. The growth impulse is given to sectors like agriculture and infrastructure. Overall, industrial growth momentum has been sought to be maintained by retaining general excise duty at 10% and not increase by 12%. This maintenance of excise ratio is not only pro-growth but also anti-inflationary. On food inflation there are a variety of pronouncements including on policy as well as specific on tax proposals. The finance minister expressed concerns about the huge price rates of wholesale and retail food items. These inefficiencies may be eliminated and the agricultural supply chain must be made more effective. These include investment, storage of cold chain. Even the boost given to fertilizer sector will go a long way in spreading the green revolution towards the eastern parts of India.
In Infrastructure, there have been a slew of initiatives. The creation of an infrastructure bond fund will provide long term funds much needed in that sector.
On employment and skill creation as well the budget has provided crucial support. Not only can India’s share of industry will grow from 17% to 25% of GDP, but India can also become one of the manufacturing hubs for the world. This requires huge increase in skills development, a goal which the FM reiterated. One, manufacturing job can have a big multiplier effect on overall employment. In the past two decades, the growth in organized sector employment has not been commensurated with the high growth in GDP and this anomaly needs to be addressed.
The budget speech also contained a slew of legislations in the financial sector. Financial sector reforms are a high priority, and are integral to making India globally competitive, as it engages more with the world. Finally, it must be commended that despite several constraints in raising revenue and substantial hike in infrastructure, education and agriculture, the projections for fiscal deficit look attractive and credible. While no big bang reform was announced by the finance minister, next year promises to bring legislations and amendments, which are bound to make the economy more dynamic and competitive. The roll-out of DTC (direct tax code) and GST (goods and services tax), and a new company law are three examples. Thus, overall the budget signals consolidation of gains and continuity of policy, to keep the economy on a high and inclusive growth path.
Kumar Mangalam Birla, is the chairman of the Aditya Birla Group.