Budget 2017: Growth push and fiscal prudence, a double delight

By Rashesh Shah

IN THE precursor to the Union Budget, the biggest question was on how the government would play the balancing act between fiscal prudence and the need to give a push to growth. In that sense, the Budget has done incredibly well to simultaneously achieve these dual objectives. By committing to stay on this path of fiscal responsibility, the government has again proven its ability to take hard decisions. While it may have wavered from the Fiscal Responsibility and Budget Management (FRBM) target of 3%, the move from 3.5% to 3.2% is still a welcome one that would be cheered, especially by the bond market investors. The low quantum of government borrowings will only add to the positivity.The focus on macro-economic stability in these times of global volatility is noteworthy .

Plans to enhance rural spending, focus on infrastructure development and social sector investments, combined with growth opportunities for the youth, will help boost economic growth. Record allocations to MGNREGA and to the rural sector, along with provisions introduced for the real estate sector in general, and affordable housing in particular, will help drive consumption. Consumption will receive a further shot in the arm with the reduction in income tax rates at the lower end of the spectrum. On the corporate tax end, a reduction to 25% for MSMEs is a welcome move by the government. While there has been no change in tax rates for larg er entities, hopefully, going forward, this will be rationalised to ensure that corporate tax rates are uniform at 25% for all corporates in the long run.

Significant focus has gone into the quantitative aspects of the Budget, and rightly so. Equally interesting, however, are the qualitative aspects that we often tend to overlook. The abolition of FIPB and the commitment to further liberalise the FDI regime clearly signal the government's focus on bringing in foreign investment. While it remains to be seen how FDI modalities would be worked out, the move is a welcome one. The reforms in political funding, particularly the move to lower the limit of cash donations to Rs 2,000, can bring in a significant amount of transparency in the process. At the same time, the provision for electoral bonds, if implemented effectively, could be a possible game changer.

India has been a bright spot in what has, otherwise, been a bleak global economic environment. We stand at what could be a great inflection point for our economy . A slew of reforms being undertaken by the government, in conjunction with a focus on expanding rural and infrastructure spending in this year's Budget, will create a favourable environment to provide the necessary elevation to the economy . By focusing on the triple agenda of `Transform, Energise and Clean' India, the government has set the base for what could be extremely exciting times ahead for us.

(The author is Chairman of Edelweiss Group)