The Union Budget 2014 gives a clear indication of the long-term directional approach for the country’s development as envisioned by the Government.
There is clarity arising from the realistic expectation that all the problems of the past cannot be dealt with in one single budget. This clearly appears to underline the directional and long term approach to economic recovery and development. I would list out the following as the notable positive initiatives in that direction:
The creation of the Expenditure Management Commission is an acknowledgement that there have been wasteful expenditure and that this needs to be addressed in a serious manner. The philosophies of ‘Do not spend beyond your means’ and ‘Approach expenses with efficient results in mind’ are evident in this.
The Budget has also approached Agriculture sector in a holistic manner, as can be seen from the development initiatives announced across all levels of the value chain – starting from soil health to balanced nutrition to irrigation to farmer enablement through NABARD schemes to an effective warehousing system. The setting up of Biotech parks and Organic farms is also a welcome gesture in this sector. We expect that these initiatives will improve the quality of agriculture, while reducing the stress on land and labour.
Manufacturing sector will be boosted with the long term initiative of setting up of 10 new industrial clusters. The focus on developing 16 ports, setting up Smart Cities with a corresponding allocation of Rs 7000 Crores, and a 15000km long gas pipeline – all contribute to improving the infrastructure support that is vital to the manufacturing sector in the country. This is further enhanced with the much-needed skilled manpower in the form of the Skill India programme, and the increase in investment allowance level, starting with capex from 25 crores.
The Finance Minister announced that a roadmap for bank consolidation will be soon drawn up. To meet Basel 3 requirements, a huge amount of capital will need to be infused. He has assured that the Banking system will be kept well and in that direction he will be considering the various suggestions that have come in.
The proposal to increase FDI in Insurance will help improve penetration of insurance in India and definitely will spur growth in the sector.
In terms of direct taxes, he has left the taxes unchanged, but for some marginal tweaks in dividend distribution tax.
Moving towards removing duty structure anomalies, the Budget has begun with a few sectors. We are hopeful this would be done across all sectors next year.
The Budget has also addressed the concerns with regard to FDI by clarifying that there would be ‘No retrospective amendment of taxes in the future’ and that steps will be taken to rationalise the way in which FDI proposals will be dealt with. The move to introduce the new accounting standards on a voluntary basis in FY 15 and on a mandatory basis in the next 2 years, is a good attempt to bring our accounting standards on par with international standards.
In addition, an efficient implementation of GST will by itself usher in an additional growth rate of 1%.
Considering that the Government was faced with challenges across all fronts, be it inflation, slowdown of growth, the threat of poor monsoons and the committed target to retain fiscal deficit at 4.1% of the GDP, today’s Union Budget announcements are very welcome and hopefully will set us on a long-term growth path.