Budget 2016: The Finance Minister has presented a growth and development oriented Budget, laying emphasis on the key pillars of agriculture, rural development and infrastructure sector.
The Budget has rightly laid a significant thrust on productive public expenditure. The budgeted capital outlay of Rs 2.18 lakh crore on roads and railways will have a multiplier effect on the economy and enable sustained high growth in years ahead.
There has been a clear attempt at addressing the demand related concern by giving a boost to the agriculture and rural economy, which had been under major stress due to two consecutive years of drought. The strengthening of irrigation infrastructure, thrust on improving soil fertility and plans to ensure sustainable use of water resources are steps in right direction. The focus laid on production of pulses is noteworthy in view of the need for food security and management of food inflation.
Another area that has received desired attention is the affordable housing sector. The fiscal incentives provided for housing projects up to 30 sq mt in metros and 60 sq mt in non-metros, combined with other tax exemptions to developers and additional tax deduction on interest on housing loans will push both the demand and supply levers in this critical sector. This will not only give a boost to real estate sector but also to nearly 200 other products that go into the construction of houses. Clearly, this will facilitate acceleration of economic growth and contribute to employment generation.
In line with the Start-up India Stand-up India mission, this Union Budget has laid thrust on entrepreneurship and employment generation. The Finance Minister has announced government support for contribution towards Employee Pension Fund for the first three years. This is in line with FICCI’s suggestion during the pre-budget consultation with the Finance Minister, wherein we had asked government to contribute to PF and ESI for the first three years particularly for start-ups and SMEs. Additionally, for driving innovation, FICCI had suggested a tax framework similar to the Patent Box regime as applicable in UK. We are happy to note that the budget introduces a special patent regime with 10% rate of tax on income from worldwide exploitation of patents developed and registered in India.
The mantra of minimum government maximum governance is reflected in the focus laid on digital penetration. The plans to introduce online procurement by Food Corporation of India, modernisation of land records under Digital India, development of social security platform on Aadhaar framework for targeted delivery of financial and other subsidies as well as extending technology driven platform for procurement of goods and services by various Ministries and agencies of government, etc. will bring in greater transparency and efficiency in governance.
Despite the huge expenditure commitments emanating from 7th Pay Commission and One Rank One Pay, the Finance Minister has significantly enhanced the developmental expenditure and yet stuck to the fiscal deficit target of 3.5% for 2016-17. This is commendable and will send positive signals to the global community. However, we do hope that the resources required for managing such huge expenditure have been judiciously accounted for and will not cause burden on the existing taxpayers. At the same time, the measures taken towards tax simplification and improving the tax litigation framework is noteworthy.
On the whole, the Budget is in the right direction and will help steer the economy to higher levels of growth.
President, FICCI, and chairman, Ambuja Neotia Group