FM’s tightrope walking gave us reasons to rejoice

In most countries, the budget is a process of raising resources through taxation and an authorisation for spending them for designated activities of the state. In our country, the budget is far more than that. It is a pulpit for making policy announcements, launching new projects, informing the citizens about the nation’s state of economy and setting directions for the journey, specially if a new government has come to power. The finance minister (FM) in India is expected to be a cross between goddess Durga, who slays the demon and eradicates all evils, and Santa Claus, known for his boundless munificence and bounty. But no FM can measure up to such high expectations.

The FM is going to be recognised for not listening to economists who asked him to provide huge fiscal concessions and embark on a bold infrastructure-spending spree, fiscal prudence be damned and let inflation devour the hindmost. He sent out a subtler message, politically, by sticking to the fiscal deficit target of 4.1 per cent of GDP set by the UPA.

He has taken a significant step to lift business sentiments and bring back the trust and confidence of foreign investors. Global companies have not been complaining about the rate of taxation in India. Reputed Fortune 500 companies were worried that they were not able to predict their tax obligations because of retrospective amendments to the Income-Tax Act, confusion about transfer pricing norms and an aggressive tax administration out to collect more by every means. Imagine how Messi and Klose would feel on Sunday if the referee changes the goalposts when they are kicking the ball in and reserves the right to disallow goals with retrospective effect!

He has vowed to clean three things in his maiden budget: the Ganga (Rs 2,037 crore), the banking system (by infusing Rs 2,40,000 crore) and black money (by taking “bold steps”). If that is not bold in its aspiration, what is? By allowing up to 49 per cent in defence manufacturing, he has encouraged the flow of investments and technology in defence production. Today we buy outright from foreign suppliers of defence and military equipment. So long as we spend on defence equipment, it is better to manufacture them in India, in turn, creating jobs, absorbing new technology and paving the way for R&D and innovation.

Likewise, insurance is highly capital-intensive and needs global networks to compete. Increasing the FDI limit to 49 per cent and announcement of e-commerce platforms will enhance the interest of global investors. Even today e-retail and e-commerce are rapidly growing across the world. Amazon, for instance, is one of the largest retailers on this planet. If FDI is allowed to come in to set up e-commerce platforms, a quiet revolution in retail would be ignited.

Given the constraints of time and the need to do some tightrope walking on fiscal deficits and tax provisions, I would give this budget an 8 on 10.

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