In his Budget speech, the finance minister spoke of growth being a necessary condition for development. His Budget has stayed largely true to this imperative, and has created several spaces for growth that the corporate sector must seize with both hands.
To begin with, the budgetary provision of an investment allowance of 15% for large projects above R100 crore implemented over the next two years has the potential of delivering twin objectives: Attracting investment and speeding up the implementation of projects, both of which will drive growth. In the medium term, this will also address the supply side imbalance that has been highlighted in the Economic Survey as a key source of inflation ? and inflation, as we all know, can prevent us from unlocking many levers of growth.
The announcement that procedures for foreign portfolio investors will be simplified is also welcome. This will attract a range of overseas investments into India, which remains one of the largest growth markets into the world. Investments are a sure driver of future growth.
Similarly, despite the pressures of the fiscal deficit, the FM has shown admirable restraint by not raising individual income taxes on the middle class and the upper middle class. Indeed, he has provided tax relief to over 18 million taxpayers earning an annual income between R2 lakh and R5 lakh.
While the tax relief of R2,000 is not very large, this still increases disposable income for these consumers and, more importantly, there is also a feel-good factor that kicks in, which should contribute to stronger demand for products and services. On the other hand, the surcharge on the super-rich is unlikely to dampen consumer demand for premium or luxury products, given that this segment of consumers has significant discretionary spending power.
The tax relief provided to first-time home buyers will promote the desire to own homes and will also stimulate growth in a number of ancillary industries in the residential construction sector. Many first-time home owners are also quite likely to invest in several assets that are necessary for a new home, ranging from home furnishings to electronic goods to appliances. This will once again provide a fillip to demand in these consumer industries.
There have been increases in duties in some consumer goods sectors, but this is attributable entirely to the imperative of raising resources. It is also creditable that the Budget has presented a responsible and balanced set of expenditure proposals, thus containing the estimated fiscal deficit at 4.8%, even while it has focused on the core agenda of accelerating growth.