Sunday, March 15, 2015

BUDGET 2015-16 – A mere display of Intent or enroute to Fiscal Solidarity?

A fortnight after the Budget 2015-16 was read out by the Finance Minister, it can be described as a budget with an enormous display of intent. A Budget that guides what the Indian Economy should achieve but the concrete plan to reach that level is still imaginary (relying on the numbers presented is debatable).

Restricting Fiscal deficit numbers at 3.9% of GDP for 2015-16 and total stake sale in the Public Sector Enterprises at more than INR 69,000 Crores is envisaged through disinvestment. With this fiscal year’s revised target is brought down significantly, reaching an ambitious plan for 2015-16 is questionable.

Reduction in corporate Taxes from 30% to 25% in the coming four fiscal years is a booster for the Private enterprises, this would lead them to invest more in infrastructure and creating capital for future needs. Also there are exemptions being removed, but we need to wait for sometime before we get clarity on the same.

Different governments come with different schemes and the previously established schemes with same objective but with different names get oblivion. An example below of an editorial says all:

It announces grand new schemes even as others in the same area that were announced just last year are yet to see the light of the day. So we are to have a new Micro Units Development and Refinance Agency Bank, with a corpus of Rs 20,000 crore, but the Rs 10,000 crore entrepreneurship fund for the same sector that the finance minister announced in his first budget is nowhere to be seen.” – EPW Editorial from 7th March, 2015 publication.

The integrity of the numbers presented in the Budget is always under scanner. Finance Minister believes that our country can grow at 8% of GDP in next couple of years, I don’t think that can it be a reality with a stalled Upper House? Can it be possible with an Ordinance route taken up by the Government? Is it achievable when our PSBs need ~INR1.6 Lakh Crores for capitalization to meet the Basel III standards? You can pose many other questions but the fact of the matter is, it’s imperative to be practical. Through sentiments and intent display an economy cannot grow. The first visible change on the ground is raising the cap of FDI in insurance from 26% to 49%. There is nothing concrete except it. You can ask me to be more patient and give the government some more time but with Land Acquisition Bill stalled and all the chaos around it, I can only be hopeful.

Also, hopeful on the integrity of the fiscal deficit number’s achievement and the disinvestment target’s ambitious numbers. Let’s see where the contours of this Budget lead us to.

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