The most encouraging announcements in the Union Budget were that the fiscal deficit would be lower at 4.6% (with a financial year 2013-14 target of 3.5%) and that the net borrowings of the government would reduce in the next year and continue falling with every passing year. This, combined with the focus on infrastructure development, would be beneficial to industry as it creates a more productive industrial environment and a stable liquidity and interest rate regime.
Other than this, there were no significant changes for industry and the Budget has continued to focus on inclusive development. The three main notable areas within the Budget are:
An increased focus on agricultural coverage and productivity, credit access and value chain improvements such as through warehouse storage capacity and cold chain capital investments;
Facilitating access to infrastructure credit by increasing the amount FIIs can invest in infrastructure bonds, and also additional provisions that allow tax-free infrastructure bonds to be raised by certain companies; and
Increased allocation to social sector spending with a 17% growth over last year. Within this, there are increased allocations to the Literacy Mission and Swastha Bima Yojana scheme.
The commitment to both the DTC (direct tax code) and the GST (goods and services tax) and the plan to set up a task force to recommend how the share of manufacturing in GDP (gross domestic product) can be increased to 25% from the current 16% augurs well for the industry.
It is unlikely that any of the tax proposals would impact the industry or the common man significantly. Aspects which could have been covered in more detail include policy statements around initiatives that improve governance and accountability, and definite measures to curb food inflation.
But for now, the fact that the growth momentum would continue, and that there would be more fiscal prudence is fairly encouraging.