The Budget for 2015-16 is a welcome departure as it lays down a roadmap in terms of growth acceleration (8-8.5% in 2015-16) through higher investment and emphasis on sharing the fruits of development with the common man. To what extent these laudable goals would be achieved crucially hinges on effective implementation of the measures announced. In another seven years (by 2022-23) India would provide a roof for each family with 20 million houses in urban areas and 40 million houses in rural areas with power, clean drinking water and toilet facilities, which implies an annual average of 1.7 million house construction in urban and nearly 3.3 million houses in rural areas. An achievable target with impetus for cement and steel demand, the state governments also must come out with matching provisions of funds to make it successful.
Another such programme is electrification of the remaining 20,000 villages by 2020 and connecting them with completion of 1,00,000 km of all weather roads, which is already in various stages of construction.
There is an elaborate programme of setting up a senior secondary school within 5 km reach of a child and upgradation of another 80,000 schools. The Budget also indicates a programme of setting up communication facilities in all villages. All these three steps along with JanDhan, Aadhar and Mobile (JAM) facilities and direct transfer of benefits, if implemented with steadfast commitment, scheduling and necessary funds duly supplemented by states, would make a revolutionary shift in the pattern and quality of life of rural population and give them a proper position in the journey of India’s Growth Story. Based on the recommendation of 14th Finance Commission, there are higher resources (42% from 32%) of divisible pool to the state governments which entail additional fund availability of Rs 1,86,000 crore in the hands of states, a large part of which can be spent on these programmes.
The Budget focuses on micro finance (MUDRA) for the innumerable small enterprises and promises a comprehensive Bankruptcy Code in 2015-16 to facilitate an honourable way out for perennially unviable units. For investment in infrastucture, the expectations by the industry were a little more. Budgetary support for railways and roads was enhanced by a total Rs 24,081 crores and capex by the PSUs would be nearly Rs 80,844 crore more than the current year. A National Investment and Infrastructure Fund with annual flow of Rs 20,000 crore, issuance of tax free bonds by the railways, roadways and irrigation, revision of PPP mode of investment with higher risks to be borne by the government, utilization of surplus lands in minor ports in the public sector for encouraging private investment and an e-Biz portal by integrating 14 regulatory permissions at one source to substitute interface with multiple agencies are likely to improve the ease of business scenario and attract corporate sector investment which was shrinking in the past.
A firm road map for Goods and Service Tax with effect from April 1, 2016, is welcome. It is also expected that announcement of five ultra mega power plants with 4,000 MW capacity each would see the light of day under the changed scenario.
For the steel industry, a brightening of investment scene is the need of the hour. Rising steel imports have been countered by enhancing the bound rate from the existing 10% to 15% (both for 72 and 73 categories) while keeping the effective rates of 5% and 7.5% for long and flats unchanged.
It would make the steel exporters to India much watchful and concerned.
To resolve problems of credit accumulation under CENVAT, the SAD on import of melting scrap (7204), SS Scrap (720421) is brought down from 4% to 2%. Basic customs duty on metallurgical coke (270400) is enhanced from 2.5% to 5%. The marginal rise in excise rate from 12.36% to 12.5%, service tax by 2% and increased cess on clean energy for coal (Rs 200/t from Rs 100/t) would make marginal impact on cost.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal