View: Road map in place, govt should now focus on execution
The budget has numerous announcements which clearly indicate the government’s progressive mind set.
Finance minister Nirmala Sitharaman’s maiden budget is prudent with a 3.3% fiscal deficit target, yet providing for long-term infrastructure development and social growth. This commendable achievement, in conjunction with the central bank’s dovish policy, would help reduce lending rates and in turn make India a $ 5 trillion economy.
The proposal of raising funds through overseas sovereign bonds is a bold step aimed to help support the ambitious RS 100 trillion infrastructure overhaul. I believe, this move will spur job creation, which is a key concern for the economy right now. The overall picture that emerges from the budget is that the government has its heart set upon building both the hard and the soft infrastructure, so that growth can be equitable to all classes. I compliment the FM for thinking through many facets of growth that go beyond numbers.
The budget has numerous announcements which clearly indicate the government’s progressive mind set: tax breaks for the purchase of electric cars; incentives to start-ups on fund raising and widening of the 25% corporate tax bracket.
The allocations for key segments like housing, electricity, clean cooking gas and single grid for power — will significantly strengthen the rural economy to make India a super power in social (quality of living) indices.
This is not to say that the government has lost sight of immediate priorities. Stressed NBFCs have found a mention and the proposed solution of a credit enhancement for banks to invest in pooled NBFC assets — with a one-time provision of 10% loss — is a good stop-gap arrangement.
The larger solution for the financial sector is, of course, in the recapitalisation and revitalisation of our public sector banks. The Budget has allocated Rs 700 billion for this and has promised consolidation, simplification and above all, the prospect of the government lowering its holding threshold to even below 51%.
Though the proposal to set the minimum public shareholding limit in a company at 35% comes with a great intent, it might deter long-term FDI flows into the country.
I believe, the budgetary provisions will kick-start the economic cycle and put the GDP growth firmly on track. The next step is a transparent and efficient execution of projects, around which this government has built a great reputation over the last five years.
(The author is president, Bank of America Merrill Lynch India)