Although the Finance Budget 2016 announced yesterday has no “Big Bang” announcements for the Corporate Sector and urban audiences, it has a clear focus to benefit the rural and farm sectors. The budgetary proposals clearly aim not only to improve rural infrastructure but also provide facilities which would enable self-employment opportunities, skill enhancement, easy access to farming and protection again adverse impact of calamities through Insurance schemes. The Government, in its full wisdom, has realised that a pro-rural & farm sector slant is critical not only for the national economy but their political objectives as well. The rural development schemes, as proposed, should also bring a lot of cheer to the infrastructure industry; as the Road; Irrigation and Housing projects to be built there would translate into a substantial demand for construction as well as manufacturing companies in the steel, cement and construction material sector. Likewise, Government’s enhanced focus on rural electrification schemes would also translate into demand for electrical equipment manufacturers.
Government’s decision to increase the planned & unplanned expenditure by 12% and Railways together with Road sector’s budget increase by 27% is indeed a very positive news for the industry. Government’s focus on rural housing as well as a package of tax incentives for the buyer of low / middle income housing would further stimulate construction activity and create new demand for goods produced by core sectors like steel & cement which in the recent years have suffered hugely due to lack of demand.
For the Corporate sector, there are no landslide announcements barring a few tweakings which would result in an additional Rs. 20,000 crores of revenue for the exchequer. There has been no reduction in the Corporate Tax rates or MAT, which would have brought some cheer to Corporate India as their performance in the recent year has been under stress. A drop in these rates would have facilitated private sector’s investment either directly or under PPP model.
The Government after much debate seem to have cast their vote in favour of honouring their fiscal deficit target of 3.5% which would bode well for India’s credit rating as well as stability of its currency. The announcement relating to recapitalisation of banks with injection of Rs. 25000 crores or more if required will also give stability to the Public Sector Banks and the Indian Banking Industry as a whole which is critical for the on-going investment plans.
Several budgetary allocation have been made for a multitude of initiatives announced by the Government including sanitation drive; promotion of digital India; basic education & skill enhancement and healthcare & social security for the poor, old and weaker sections. That qualifies the budget to be seen as one for “Masses” with a lot of “Human Touch”.
MD & Group CEO, Jindal Steel & Power Ltd