The Budget 2015-16 has come at a time when green shoots of economic revival appear to be taking root. It also comes on the back of huge expectations. The Budget is strong on vision, reflects clear intent to put the economy on the path of double-digit growth and has a strategy to execute challenging reforms.
From a macroeconomic perspective, the government has done well to meet the fiscal deficit target of 4.1%. The softening of crude and commodity prices have contributed in a significantly lower CAD. Forex reserves at $ 340 billion are at an all-time high. The government is committed to keep inflation at below 5%. All these factors gave FM a platform to lay out a road map of lowering fiscal deficit to 3.9% in FY16, 3.5% in FY17 and to 3% in FY18.
The Budget clearly provides a tremendous impetus to ‘Make in India’. Increased investment in infrastructure of R70,000 crore and a higher allocation of R2,46,727 crore for defence will clearly provide a boost to the domestic manufacturing industry and help in creating new jobs. This would help revive the investment cycle and contribute to increasing the share of manufacturing in national GDP from 15% to 25%. We now expect the government will expedite announcement of the new Defence Procurement Policy to facilitate larger private sector participation in defence production.
Some of the key enablers to achieve manufacturing growth include GST roll-out from April 2016, five UMPPs of 4,000 MW each, which will give a boost to the capital goods industry, the initial R1,200-crore allocation for the Delhi Mumbai Industrial Corridor with assurance for more funds later, significantly higher investments in the renewable energy sector, opening of opportunities for medium and small industries, emphasis on the housing sector and corporatisation of ports.
The road map to reduce the basic corporate tax rate to 25% over the next four years, deferring GAAR and avoidance of retrospective taxation will considerably increase confidence of domestic and foreign investors. The abolition of wealth tax is also welcome.
While the FM did speak about the need to push exports, I am slightly disappointed that minimum alternate tax and dividend distribution tax on special economic zones have not been withdrawn or at least lowered as was expected. We hope the new Foreign Trade Policy to be announced next month will provide incentives for exporters.
By Baba N Kalyani
Chairman & MD, Bharat Forge