BY INVITATION. A great leap forward

One of the most striking facts in the Budget speech was that 62 per cent of the resources that are being mopped up through taxes by Centre and States will be effectively controlled by the States now. Following the recommendations of the Finance Commission, this will indeed be a transformational change, giving much more autonomy and control to the State governments.

Of course, what this has meant for the Centre is a far more constrained fiscal space. Nevertheless, the finance minister has chosen to provide a boost to public investments, especially in critical infrastructure sectors such as roads and railways. He has chosen to accordingly phase out the journey towards the medium-term fiscal deficit target of 3 per cent of GDP. At the current stage of the business cycle, this is a rational choice. At the same time, the FM has not taken his eye off fiscal discipline, has managed to achieve the fiscal deficit target for the current year and targeted a small improvement next year.

This Budget will be remembered for the bold and pragmatic vision it has set for the future, backed by a well-rounded and comprehensive package of reforms and new ideas. Having got India’s macroeconomic numbers under control and having re-secured investors’ confidence over the past few months, the FM has sought to reinvigorate growth and investments.

In line with the expectations, infrastructure has received a great focus. There are many initiatives to address the twin needs of the sector — faster clearances and financing needs. These include creation of a fund to refinance infrastructure financing companies, revitalisation of the PPP model, regulatory reforms, steps to reduce the need for multiple prior permissions and offering of new projects in the ‘plug and play’ mode starting with five ultra-mega power projects of 4,000 MW each.

There is also a clear roadmap on taxation. The long-awaited introduction of GST is now slated to be over by April 2016. This would be a great relief for the industry, helping create a common national market. This time, the date with GST seems to be more certain as there appears to be a greater level of consensus.

The corporate tax rate will be brought down to 25 per cent over the next four years. With lower taxation and fewer exemptions, our corporate tax system will get more aligned with international tax system. On GAAR, the clear statement that this would be applicable from 2017 and will be with prospective effect would smoothen the nerves of investors. The abolition of the wealth tax shows the pragmatism of the government.

Bringing commodity markets under SEBI and formation of a financial redressal agency across sectors are good steps. The empowerment of a monetary policy committee through a formal monetary policy framework agreement would make the monetary policy setting more professional and autonomous. Gold monetisation scheme and sovereign gold bonds are the other big moves that will help channelise large amounts of savings into more productive uses. New legislations to track down black money and the greater use of integrated databanks to catch the unaccounted income and assets will also help tap the blocked resources.

Another welcome announcement is the move towards a cashless economy. With the introduction of payment banks and the deepening of financial inclusion through the hugely successful Jan Dhan Yojana, this should be an achievable goal over the coming years. Improved access of masses to banking services is also enabling the government to target a nearly ten-fold increase in the scope of direct transfer of benefits. In turn, it will eliminate leakages in delivery of benefits. In future this may also allow the government to curtail its outgo on subsidies without sacrificing the interests of those who need them. The new schemes to create an effective and universal social security system would create safety nets for the poorer sections of the society.

By 2022, the FM wants every Indian household to have adequate access to housing, means of livelihood, electricity, health, education and social security. The Budget backs up this vision with various initiatives, creating a package that should help move our growth closer to our potential in the near-to-medium-term and to meet the aspiration of our youth in the long-term for a stronger, cleaner and more just India. Indeed a great leap forward.

The writer is the Chairman of the Aditya Birla Group