By Amit Kapur
Union Budget 2019 India: Between the Economic Survey yesterday and the Budget today, we know the Government’s aspiration to take India to US$ 5 Trillion economy by 2024-25. The integrated approach to economy is a breath of fresh air. Indeed investments, savings, exports, growth and jobs are interconnected. Integrated water resource management in hands of a Jal Shakti Mantralaya can work wonders, as would investment target of Rs. 100 lakh crores in infrastructure over the last 5 years – if realized. So would the integrated focus on physical connectivity through Bharat Mala, Sagar Mala, Power grid, Gas Grid, Water grid, Airports and Highways.
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Given the limited time perhaps, the Budget has more directional pronouncements but comes short in detail and “how to”. While many may find the lack of relief in tax, enhanced levy on high earners and welfare pronouncements left leaning, the Budget interestingly acknowledges that the Government does not look down at legitimate profit since India Inc. is India’s job and wealth creator.
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There is some relief to the twin balance sheets problem plaguing investment cycle in context of reduction of NPAs by Rs. 400,000 crores over 4 years and the announcement of Rs. 70,000 crores recapitalization of public sector banks. The intent of brownfield asset modernization to augment infrastructure investment; utilization of land bank with Central Ministries and CPSEs through PPP; divestments of CPSEs; relaxing access to and exit from the bond market backstopped by credit enhancement are noteworthy. Promise of building rail infrastructure with Public Private Partnership is encouraging. We are not sure when and how the Kelkar Committee Recommendations for rejuvenating PPP will get implemented. Yet much depends on how effective and timely is the implementation of these measures.
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Grant access to voluntary organizations focussed on welfare/social sector to raise capital as equity, debt and mutual fund from the markets under supervision of SEBI should help. In context of a good FDI performance (6% growth last year against global slow down by 13%), additional steps to relax FDI in media and insurance and access to local sourcing for single brand retail shall go way a long to induce investments.
The focus on rural economy, housing, agricultural reforms, higher education and environment (LED bulbs, Electric Vehicles) would go long way in securing a balanced growth.
Being a strong statement of intent, the Budget lacks details on the nuts and bolts of how the stated goals will be achieved. How would the required funds be raised in wake of sluggish growth of last 2 years? Can the cash flow problems faced by corporates and NPAs of banks be overcome to kickstart savings and capital formation remains to be seen. While the push on MSMEs is laudable, the announcements on improving creditworthiness of NFBs lacks credibility since support is promised only for “financially sound” ones. What happens to those bleeding?
Perhaps a lot more clarity with come from the expert committee to be set up to look into long term financing for infrastructure, as also Surjit Bhalla led Committee on exports. All in all, it is a robust policy statement that must be backed up by resolute action if we are to achieve our potential in economy. Implementation will be key!
(The author is Joint Managing Partner, J Sagar Associates )