A thumbs up to inclusive growth

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Published: March 1, 2015 2:05:55 AM

The FM cut straight to the chase and stressed on intent to support the ‘Make in India’ spirit, but stopped short of spelling out a clear roadmap for turning India into a manufacturing hub

If Arun Jaitley’s maiden Budget was a philosophical treatise, sketching a long-term economic agenda for the nation in line with his party’s development-oriented political manifesto, then his second Budget was sharp and precise, hitting all the hot keys for the nation’s immediate future—growth, inflation, employment and ease of business.

To pull huge masses of people out of poverty, India would simply have to grow fast in double digits over a sustained period of time. The finance minister in his second Budget, therefore, cut straight to the chase and stressed on his government’s intent to support the ‘Make in India’ spirit.

But he stopped short of spelling out a clear roadmap for turning India into a manufacturing hub.

There was, in fact, nothing of note for either the manufacturing sector or India’s stagnant core industries—steel, cement and power. Indeed, by doubling the clean energy cess on coal to R200 per MT, Mr Jaitley has dealt a double blow, as it comes on top of the 6.3% hike on coal freight announced in the rail budget. Taken together, these moves effectively nullify any gain that the sector might have expected following the ongoing coal auction process.

In a proposal that should please the steel industry reeling under a market glut, the tariff rate of basic customs duty on iron and steel appears to have been increased from 10 to 15%. On the downside, the finance minister proposed an increase in service tax and excise duty, which will increase the pain for domestic steel makers. The industry will now hope that taking a cue from the core messages of this Budget, the RBI will soon cut interest rates and give further fillip to growth across sectors.

On the upside, the proposal to build four lakh houses in rural and two lakh houses in urban India could deliver a powerful impetus to the construction industry and accelerate the growth of steel, cement and other related sectors. Also, the massive commitments made to reboot India’s dawdling infrastructure industry will not only spur growth and generate employment, but also lead to substantial social benefit.

On the whole, Budget 2015-16 can be seen as a continuation of the vision unveiled last year, with a clear emphasis on poverty alleviation, job creation, skill development and turning India into a manufacturing hub. As in the past, however, other than a few sops like reduction in corporate tax by 5% in four years, this Budget is anchored to the rural theme and is an affirmative step in the direction of inclusive growth.

By Ravi Uppal, MD & Group CEO, JSPL

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