Budget glossed over infrastructure
The Union Budget 2008-09 will doubtless give a stimulus to consumer spending. It will empower women and senior citizens with more money in their hands net of taxes and benefit people of lower socio-economic strata.
By Hemant Kanoria, |
The Union Budget 2008-09 will doubtless give a stimulus to consumer spending. It will empower women and senior citizens with more money in their hands net of taxes and benefit people of lower socio-economic strata. Among the many incentives, the budget has also endeavored to give some incentives, although moderate, to parts of the healthcare and infrastructure sectors.
The Finance Minister���s determination to improve the healthcare industry was well reflected, in a 15% increase, over last year, in budget allocation to the National Rural Health Mission (NRHM). Similar grants, such as the five-year tax exemption for constructing hospitals in tier II & III cities, will help alleviate some of the major deficiencies in healthcare, a basic necessity that millions are deprived of in India.
With regard to the infrastructure sector, the endowment for a 5-year tax holiday for building 2 to 4 star hotels in specific districts, valid for projects until March 2013, will reinforce the tourism infrastructure industry.
The budget also supported crucial projects, such as the setting up of Ultra Mega Power Plants (UMPPs) that would help mitigate power deficiency in the country, and extended grants to programmes like JNNURM and the Rajiv Gandhi Drinking Water Mission.
Furthermore, the reduction of Cenvat from 16% to 14% will enhance the Indian manufacturing sector, which is extremely labour-intensive. While India has developed a deep and vast equity market, the finance minister���s decision to expand the market for corporate bonds by setting up exchange-traded currency and interest-rate futures along with the development of transparent credit derivatives, will provide a quantum jump for the bond market, which plays a critical role in funding capital-intensive industries.
While the government has provided for viability-gap funding, the infrastructure industry has not been able to use this facility due to the tardiness of administrative processes that choke the disbursements of government aid.
The lack of assertion from the Union Budget towards restoring tax holidays for infrastructure sectors in Section 10 (23G) of the Income Tax Act, minimises incentives for infrastructure-wary investors. Without the indispensable tax and policy support from the government, for certain highly risky zones, which are extremely vulnerable to political and environmental instability, India will have no hope in driving foreign investment into the country.
While the finance minister���s confidence in maintaining India���s GDP growth at 9% is promising, I fail to see how the government can further germinate the economy without endorsing and catering to the needs of the infrastructure industry.
(The author is Vice Chairman, SREI Infrastructure)
The Finance Minister���s determination to improve the healthcare industry was well reflected, in a 15% increase, over last year, in budget allocation to the National Rural Health Mission (NRHM). Similar grants, such as the five-year tax exemption for constructing hospitals in tier II & III cities, will help alleviate some of the major deficiencies in healthcare, a basic necessity that millions are deprived of in India.
With regard to the infrastructure sector, the endowment for a 5-year tax holiday for building 2 to 4 star hotels in specific districts, valid for projects until March 2013, will reinforce the tourism infrastructure industry.
The budget also supported crucial projects, such as the setting up of Ultra Mega Power Plants (UMPPs) that would help mitigate power deficiency in the country, and extended grants to programmes like JNNURM and the Rajiv Gandhi Drinking Water Mission.
Furthermore, the reduction of Cenvat from 16% to 14% will enhance the Indian manufacturing sector, which is extremely labour-intensive. While India has developed a deep and vast equity market, the finance minister���s decision to expand the market for corporate bonds by setting up exchange-traded currency and interest-rate futures along with the development of transparent credit derivatives, will provide a quantum jump for the bond market, which plays a critical role in funding capital-intensive industries.
While the government has provided for viability-gap funding, the infrastructure industry has not been able to use this facility due to the tardiness of administrative processes that choke the disbursements of government aid.
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Apparently, the Budget has not paid adequate attention to the Public Private Partnership (PPP) for building infrastructure. I strongly feel that unless the government gives the infrastructure industry the requisite financial, fiscal and tax stimulus, it will continue to face obstacles in raising the necessary capital for infrastructure projects.The lack of assertion from the Union Budget towards restoring tax holidays for infrastructure sectors in Section 10 (23G) of the Income Tax Act, minimises incentives for infrastructure-wary investors. Without the indispensable tax and policy support from the government, for certain highly risky zones, which are extremely vulnerable to political and environmental instability, India will have no hope in driving foreign investment into the country.
While the finance minister���s confidence in maintaining India���s GDP growth at 9% is promising, I fail to see how the government can further germinate the economy without endorsing and catering to the needs of the infrastructure industry.
(The author is Vice Chairman, SREI Infrastructure)
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