Finance Minister Nirmala Sitharaman’s maiden budget presentation in parliament on Friday was more in the way of a continuation of Modi government’s policy initiatives in structural reforms to improve ease of doing business and enhance growth in the mid-term.
The two-hour long speech, with emphasis on initiatives taken and enumeration of last five year’s achievements in terms of infrastructure created, seemed more on the lines of an election speech. It was rife with promise of good intentions whether in plans to improve railway infrastructure, metros, waterways or air connectivity with plans to make India a hub for aircraft leasing, financing and maintenance business.
As indicated in the Economic Survey presented on Thursday, some thought has gone into efforts to boost private investment particularly from overseas. This is in line with efforts to boost domestic manufacturing with the withdrawal of incentives earlier given to components imports for value addition.
For the aam admi, there are no shocks in the form of any new taxes, with incentives for loans taken to purchase a low-cost dwelling and electric vehicles while for the trader class there is a new pension scheme.
For the corporate sector, while there is a promise of further rationalisation of GST and simplification of tax filing besides extension of lower 25 per cent tax slab to companies with up to Rs. 400 crore turnover from earlier levels of up to Rs. 250 crore ( covering 99.3% of all companies).
For high-income individuals with Rs 2-5 crore annual income and those with income exceeding Rs 5 crore, there will be an additional tax burden of 3 to 7 per cent respectively.
The contours of the budget should be seen in the light of the vote on account presented in parliament by the Modi government. What needs careful scrutiny are the fine prints.
A worrying aspect of the budget, however, are the plans to go in for further market borrowings, this time from overseas. “The fact that India has less than 5 per cent of its GDP as external debt was a conscious effort in the past. But now reversing that stance might expose India to external shocks in a much greater degree,” says N. R Bhanumurthy of the National Institute of Public Finance and Policy (NIPFP).
