Mumbai: Indian Prime Minister Narendra Modi’s budget sought to look beyond the government’s move to invalidate 86 per cent of the nation’s cash and focus on growth by spurring consumption and adding jobs.
Billions of dollars of spending on roads, housing, railways and the rural economy have been pegged to achieve his target. Finance Minister Arun Jaitley in the federal budget presented on Wednesday identified textiles, leather and tourism as sectors that will increase employment and promised spending to train workers in the industries.
Jaitley proposed to amend and simplify the nation’s labour laws aimed at boosting manufacturing, while also raising allocations for a guaranteed rural jobs programme and irrigation fund. The total infrastructure allocation for the 2018 financial year was proposed at Rs3.96 trillion ($58.6 billion), including Rs640 billion on building highways.
The government will now shrink the budget deficit to 3 per cent of GDP in the year through March 2019 instead of 2018 Government to inject Rs100 billion into state-run banks, compared with the Rs250 billion set aside in the last budget Plans tax relief for overseas investors in some bonds To cut tax on LNG imports to 2.5 per cent from 5 per cent to promote gas usage Government plans to amend rules on drugs and cosmetics to lower drug costs, ensure use of generics Eases long-term capital gains tax for property Plans to cut tax rate for small and medium enterprises to 25 per cent from 30 per cent India Inc.’s view on the budget
"Almost half the budget is dedicated to rural areas, which should certainly have consumption growth happening in the rural areas,” said M S Unnikrishnan, managing director of Thermax. "Should be good for consumption oriented industries like automobiles, beverages, textiles. All of them should do better.”
The "metro policy for India will create more jobs and help standardisation of metro systems in India,” said Harsh Dhingra, India’s chief country representative at Bombardier Transportation. It’s "a win-win for the industry and rail transportation sector.”
"Overall investment-pro strategy of the finance minister is going to be beneficial, both to the rural India as well as to boost infrastructure,” said Amritanshu Khaitan, managing director of Eveready Industries. "Rural electrification will be positive for Eveready’s growth in lighting. I think the thrust on electrification will help our LED business grow."
"The government have put in all the required ingredients to incentivize urban decongestion and the development of new industrial cities around our industrial transport corridors," said Joe Verghese, managing director at consulting firm Colliers International India. "Granting infrastructure status to affordable housing will provide a boost in volume of construction activity across the country.”
"It is a budget, I would say, designed for job creation and creating investment because 96 per cent of organised sector is small and medium," said Sumit Mazumdar, chairman and managing director of Tractors India.
"The budget strikes a positive tone overall, with the government doing a fine act of sticking to fiscal consolidation while focusing on key initiatives like agriculture and infrastructure spending," said Priyanka Kishore, Lead Asia Economist at Oxford Economics, Singapore.
On the government dismantling the Foreign Investment Promotion Board, the reactions were unequivocal. "Given most sectors are under automatic route, FIPB was losing its significance,” said Aakash Choubey, partner at law firm Khaitan & Co. "Move to abolish it is positive and may give a fillip to FDI, but a lot will depend on a consistent roadmap that government should lay down.”
Moody’s Investors Service said in a statement that India’s budget marked a continuation of fiscal prudence. The ratings company expects the deficit targets to be achieved, although there will be limited room for slippage.