The finance minister has struck a good balance between political necessity and economic compulsions. While increasing expenditure on welfare schemes, he has also created an environment for investment, which will propel growth with stability.
The finance minister has not only reduced the fiscal deficit in the current year but also kept his word of maintaining it at 4.8% in 2013-14.The outlays and incentives provided in the Budget will make a qualitative change to the behaviour of the economy, which until recently had been under some stress.
The Budget provides incentives for investment through the investment allowance at 15% to companies on investments over R100 crore. At the same time, the finance minister has increased the surcharge on profits over R10 crore. To an extent, one can negate the other.
The Budget takes a further step towards promoting generation of power. The customs duty on electric plant and machinery has been reduced to zero and a facility has also been provided for low-cost funding. This will encourage power development, though it will take time to make up the power deficit.
The Budget also encourages savings formation, necessary for backing increased investment. The liberalised RGESS, inflation-linked bonds, etc, will stimulate savings and also, to an extent, reduce fold imports.
The finance minister has taken care to ensure stability of the tax system, both direct and indirect. The additional revenue of R18 crore has been mopped up from temporary surcharges and adjustments, and customs and excise duties on specific goods. It is important that the tax system is freed from these temporary measures and brought back to a long-term stable system next year as assured by the minister.
There is considerable emphasis in the Budget on schemes that will support inclusive growth. This will generate employment for the common man supported by skill development to enhance the market value of labour, productivity and incomes.