Union Budget: The challenge will be in implementation

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Published: March 1, 2015 2:49:10 AM

Boost to infrastructure investment is the high point. It is clearly a growth-oriented Budget, which at the same time seeks to address some of PM Modi’s pet themes

Arun Jaitley has presented a well-crafted Budget that enunciates a clear vision of the government’s priorities and policies. It is clearly a growth-oriented Budget, which at the same time seeks to address the PM’s pet themes on which he had connected so resonantly with the electorate last year.

Boost to infrastructure investment is the high point. Extending the 3% fiscal deficit target by a year will release additional R50,000 crore per year, which will further enhance the available fiscal space.

Aside from budgetary investment, PSUs along with the railways will increase off budget investment by leveraging their assets. The most exciting prospect is of corporatising port trusts which are sitting on vast amounts of unleveraged assets. The Budget also seeks to crowd in private investment by revitalising the PPP framework, issuing tax-free infra bonds and setting up the Investment and Infrastructure Fund.

Increase in road cess on petrol and diesel for the road sector is timely.

Proposals on tax policy are also well conceived. They should lead to simplification and predictability and reduce tax policy risk for investors.

Reaffirming the target for GST is welcome and the increase in service tax from 12% to 14% is a step to smoothen the path for GST. One would have liked to see a clearer road map including development of IT infrastructure, a fund for compensating states, capacity building in states and so on. Corporate tax rationalisation by reducing rates and curtailing exemptions will also make tax rates more competitive for investors.

Black money stashed abroad is an issue on which the government has been on the backfoot. The FM has adopted a two-pronged approach of creating a new law for deterrence and taking measures for reducing the scope for generation of black money, like monetising and recycling of gold assets and disincentivising cash transactions. Care will need to be taken that the new law does not become too draconian.

There are many welcome announcements in the financial sector – like merging of FMC with Sebi, setting up of public sector banks holding company, setting up of a public debt management office. Here too, implementation will be key.

There are some areas in which the Budget could have done more. There are not many concrete measures for making the slogan of Make in India a reality. Revitalising SEZs could have been one. Similarly, for skill development, Ganga cleaning etc, a clearer action plan would have demonstrated the government’s commitment towards them.

Post the 14th Finance Commission, impact on the Budget could have been spelt out. The fate of many centrally sponsored schemes as also the status of hitherto special category states seems to hang in the balance.All in all, it is a welcome Budget. The challenge will be in implementation of the many announcements.

CM Vasudev, Former economic affairs secy

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