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Commendable maiden effort of the new government
July 12, 2014 , 7 : 39 pm GST
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Union Finance Minister Arun Jaitley's budget has been hailed in the media in different ways. The ruling party and its supporters call it very good for India and the opposition and others called it lacklustre.
What is the reality? A proper gleaning of various proposals reveal that the attempt made by the finance minister has been sincere.
Given the myriads of challenges and the state of economy, it was virtually impossible to "straighten" everything with a magic wand.
If we recall, Prime Minister Narendra Modi, sometime ago, had warned that the first two years will see a number of pain adjustments.
The finance minister has accepted the fiscal deficit target of 4.1 per cent as given by the previous government. and going forward, he projected 3.6 per cent for 2015-16 and 3 per cent for 2016-17.
The optimism and the goal setting to a very daunting number are indeed commendable. But, circumstances are not very easy.
The finance minister is relying intensely on resource raising and expenditure control.
The biggest challenge here is how is he going to contain subsidies — the holy cow of our economy. This subject is a veritable minefield for all politicians.
In addition, the proposal of bringing real estate investment trusts i.e. REITS is indeed novel.
These types of entities have a successful existence in the developed markets.
The minister's proposal to introduce this for infrastructure projects is commendable.
With anticipated tax advantages, this will ease the pressure on banking system and also provide a platform to NRI's and other foreign investors to directly invest in the Indian real estate market. I see a big demand for quality real estate not only in Metros but also in second rung cities.
Introduction of an attractive investment allowance scheme to spur the sluggish manufacturing sector, reeling under the onslaught of cheaper imports, is a step in the right direction.
Banks will also be permitted to approach the Indian public to raise this money.
The budget contains a novel proposal of ensuring digital revolution across pan India by setting up National Rural Internet Technology Mission for services in schools, training in IT skills, E-Kranti for government Service delivery and governance scheme.
The increased FDI in defence and insurance up to 49 per cent from the present 26 per cent is a step in the right direction.
In reality, I am not sure, how this will help since the foreign investors will not have power of control on the Indian entity as it is less than 51 per cent.
Perhaps, the minister did not want to provide for an enhanced limit in the first year but, would rather consider it in the following year.
Under the capital receipts budget, the govt. recognised a sum of INR634 billion towards disinvestment of equities in the public sector.
There remains an expectation gap in this segment year after year.
During the previous year the performance has not been encouraging since, the actual receipts were barely 50 per cent of the target.
It's high time these exercises come out of the purview of emotive legislative decision making. Timely resource raising therefore is vital.
Finally, my dream is to see a marked decline in the defence budget which as of now stands highest at INR2,200 billion in this budget.
Let's aim to strengthen and attenuate a good foreign policy which is a panacea for good governance and eventually impact our defence spending.
The author is a freelance contributor based in Muscat. All the views and opinions expressed in the article are solely those of the author and do not reflect those of Times of Oman.
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July 13 at 9 : 09 pm
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