As good as it gets

Mr. Kumar Mangalam Birla

The interim budget presentation comes after a series of policy measures announced in January. These policy measures were mainly related to customs and excise duty cuts, which basically followed an already announced time-table of progressively decreasing peak custom duties to ASEAN levels. Given the constraints inherent in presenting a vote-on-account, it must be said that the interim budget continues to reinforce the feel-good-factor. There's a bit for everybody, viz., farmers, industry, healthcare. The budget reaffirms the healthy state of the economy, with the GDP growth this year expected to be around 7.5 to 8 percent, and remaining healthy next year as well. The tax structure has been left intact, although this is partly due to the limitations of an interim budget.

The high GDP growth has led to revenue buoyancy, and this has enabled the minister to peg the fiscal deficit at a surprising 4.8 percent of GDP in the current fiscal year, far below the expected level. The intent to lower this further to 4.4 percent next year is extremely heartening. So certainly one of the "paanch" priorities, namely that of fiscal consolidation is on course. This is very welcome, and the capital markets are bound to give their nod of approval. The finance minister gave an additional boost to the capital markets, by extending the capital gains exemption by another three years (itself a positive surprise) and lowering of central stamp duties. The lowering of fiscal deficit will bring cheer to the bond markets. This will also enable interest rates to remain low, adding to industrial competitiveness, by reducing the cost of capital for corporates.

Infrastructure is another priority area that continues to get priority. Industrial growth is heavily dependent and often constricted by the state of infrastructure facilities. The sooner this sector is boosted by massive public and private investments, the sooner will industrial growth accelerate to double digits. The budget brings good tidings for infrastructure sectors such as shipping, power and airports. The extension of power investment subsidies to 2012 is quite welcome and timely.

The budget also emphasizes the human welfare angle by extending the PM's nourishment program to 2 crore families. The minister has also announced that six world class hospitals would be set up, and six medical colleges would be upgraded.

Overall, the interim budget stays the course of liberalization and conforms to the objective of making India an economic powerhouse in the coming years. It should add significantly to the feel-good factor.