Guest Column: M.S. Unnikrishnan, Managing Director and CEO at Thermax
Being an election year, more like a vote-on-account, will certainly restrain the Finance Minister in preparing and presenting the Budget. A lower than expected GST mop up and disinvestment revenue combined with effects of reduced GDP growth than projected may widen the fiscal deficit for the ongoing year to almost 3.5%. The Government borrowings is likely to have exceeded the original budget with project overruns, higher subsidies, bank recapitalisation needs arising out of the ballooning NPAs as well as the impact of seventh pay commission and OROP implementation.
A lot of focus will be to redress farm distress as also to perk up the rural economy. We expect the largest chunk of the Budget allocation as direct benefit transfer to the farming community, rural and urban poor. Certainly understandable, and wiser in an election year. Continuing with the previous year’s programme, development of rural infrastructure should also witness substantial funding. These should enrich the rural economy; indirectly benefiting the industries catering to consumer goods, durables and low-end automobiles.
Infrastructure projects barring road construction – which have almost doubled in the current year – should get addressed. Railways should have a considerable increase in their capital budget towards route expansion, modernisation of existing facilities, speed enhancement and safety. Air traffic in the country is witnessing unprecedented growth rates in the recent past. Upgradation of the existing airports as well as the creation of new ones need to be considered. A good beginning has been made with the maiden inland water-based cargo shipping initiative. We expect considerable funding towards expanding this further to ease the highway traffic.
Water supply to both urban and rural sectors need significant attention. Secondary and check dams that will facilitate both irrigation and drinking water supply should be prioritised.
The last refinery expansion, announced five years ago, was just commissioned at BPCL Kochi. The booming growth of the automobile population will necessitate the capacity enhancement of oil refineries. The government should announce atleast three refinery expansions with the necessary allocations towards immediate implementation both for the refining section as well as for the downstream petrochemical manufacturing. Private investment has been barely keeping in tune with the capacity needs of the increased consumption. This has had a telling effect on the employment generation in the country too. The time has come for the government to incentivise industrial investment in notified areas by way of capital subsidy, preferential interest rates and tax holidays for specified periods based on jobs created. To stay abreast with this highly competitive job market,women need specialised skills, where the government should announce women empowerment and employment programmes for skilling with necessary funds allocation.
Global growth rates are expected to climb down from 3.3% to 3.1% in the forthcoming years. Protectionism combined with an ongoing trade war initiated by the US against China in such a circumstance will make it difficult for the country to register export growth which has been declining in the last few years. With a skyrocketing import bill, fuelled by enhanced crude volumes and electronics goods will impact our current account balance. We expect the Budget to envisage provisions for a hassle and duty-free import of raw materials and components to support export, apart from fiscal support through incentives for those who register double-digit growth in dollar terms. At the policy level, government should shift from political diplomacy to economic diplomacy to enhance our international trade. As a signatory to Paris agreement via COP24, compatible budgetary allocations are expected for renewable energy deployment in biomass, solar, wind and geothermal sectors.
Medium and small scale industries are reeling under liquidity crisis both for capacity building and working capital. The banking sector stress has further added to their woes. We expect policy and budgetary support to ease this crisis to accelerate their growth and contribution to the national economy.