The Budget announced some bold reforms, but at the same time, shows that the economy is still under stress.
The projections made in 2014-15 have not been achieved once again as in the previous three years. The Budget estimates (BE) 2014-15 had assumed total receipts of R12,63,715 crore but the revised estimates (RE) show a drop of almost R1 lakh crore and the FM has promptly resorted to a cut in Plan expenditure to balance his books. As a result, the BE for FY16 is almost identical to BE of FY15 with an overall expenditure of R17,77,477 crore. The stress in FY15 is even more evident on reading of finer details: a) revenue shortfall despite increase in duties on fuel and b) overall subsidies in line with BE despite a significant drop in international crude prices.
The bold reforms in the ease of doing business space need to be applauded. For the first time the issue of a broad-based plan to provide basic social security to a large portion of our population at very affordable rates has been outlined.
The plan to use JAM (Jan-Dhan, Aadhar and Mobile) to improve the overall governance and direct transfer of benefits to the needy is laudable.
The FM could have highlighted concrete steps to rationalise subsidy instead of just reiterating government’s commitment to do so.
Tremendous pressure by public at large and our judiciary has resulted in announcement of some measures to curb black money generation. However, this needs to be backed up by real action on the ground and effective enforcement of law.
While the reduction in corporate tax rates over four years is welcome, the FM could have demonstrated that he really means business by announcing a 1% cut from FY16 itself. Further, the proposals on the personal I-T front are disappointing as the FM has not made any changes and not put any money in the hands of our youth to increase their spending power.
The deferral of GAAR takes the threat away but the threat of retrospective amendment has still not been put to rest.
The FM wants the business community to believe his words of not resorting to this, but a hanging sword used in the recent past by the predecessors does not inspire much confidence.
Surprisingly, the disclosure levels in the Budget speech are much lower than the past with no details provided on the performance in FY15 by comparing the BE FY15 with RE in terms of revenue generated or expenditure incurred, particularly on Plan vs non-Plan expenditure.
Overall, the Budget sets out the vision to improve overall competitiveness of Indian economy and make it easier for doing business in India. FM has also allocated more resources to achieve the broad objectives set by the new government and achieve double-digit GDP growth not in the distant future. There is something for everyone in this Budget and it can be rated at 7.5 on a scale of 10.
By TV Mohandas Pai
Chairman, Aarin Capital Partners