FM Arun Jaitley playing Test match, pacing innings to win

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Published: March 1, 2015 4:10:12 AM

Be reassured that govt is steadily laying the foundation of a higher economic growth trajectory sustainable for decades, rather than just a year or two

While those clamouring for a so-called ‘big bang’, reforms-oriented Budget might have a sense of being let down, the new Budget should actually reassure everyone in the country that the current government is steadily laying the foundation of a higher economic growth trajectory that can be sustained for decades, rather than just a year or two. The Budget’s broad direction on being an inclusive one for all Indians is consistent with various statements and actions of the government since it took over.

There are several reasons to believe that the Indian economy will see a steadily increasing investment activity—aided both by public spending as well as private. As far as private spending is concerned, while the FM had very limited leeway this time in providing meaningful financial incentives to domestic businesses and would-be entrepreneurs, a positive outcome of a stable, business-oriented regime at the Centre could be a steady increase in FDI in the coming months, especially in sectors such as railways, defence, power (including renewables) and roads, to name a few. This additional FDI would catalyse additional direct and ancillary investment in the manufacturing sector and provide additional impetus for job creation. Investment sentiment will also be given a fillip by the intent to reduce the peak rate of corporate income tax by 5% over the next four years.

Streamlining of distribution of subsidies directly to intended recipients might actually provide more stimulus to consumer spending by way of prevention of leaks. At the same time, the stated determination to curb black money and enhancement of penalties on concealed income could bring more revenue.

The increased thrust on health insurance for the poor will have a major impact on increasing accessibility and affordability of healthcare. What is, therefore, the implication for society at large and consumer products industries in particular over the next 12 months? The slew of measures taken by the government in the past nine months, plus measures announced in the Railway and general Budget, should give enough reason to be optimistic that job-creation activity should restart, thereby laying the foundation of a more social-inclusive growth. Increase in investment through government spending and through private Indian and international entities should also provide a boost to consumer spending in the coming months, even though the marginal rise in service tax could be seen as a slight dampener.

To use the analogy from cricket that seems to be on top of the mind of many in India, the FM is (rightly) playing his innings as necessitated by a five-day Test match in very tough playing conditions, rather than get carried away with the spirit of a 20/20 or 50/50 overs spectator sport, and pacing the innings with a clear intent to win!

By Arvind Singhal, CMD, Technopark

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