Two countries one budget

Mr. Kumar Mangalam Birla
The Economic Times
1 March 2005

The Finance Minister has presented an excellent budget, one that promises solid traction to the goal of taking India’s GDP growth to around 7-8 oer cent pa on a sustainable basis.

Commendably, it also focuses on the human dimensions of development through measures aimed at rural India, and across multiple areas — among them education, health, irrigation, drinking water and infrastructure.

Bold and consistent with the objective of unleashing India’s economic and human potential, it also throws up opportunities. The economy has developed strong foundations, a critical mass, and a certain momentum. The budget does a lot to ensure that this will be fully leveraged upon.

There is a plethora of initiatives aimed at rural India, such as the use of micro-irrigation to benefit an additional 10 million hectares; more steps to provide universal access to primary education; mechanisms such as a National Rural Health Mission and a National Horticultural Mission; and promotion of micro-insurance.

The budget also moves ahead on the path of facilitating India’s manufacturing sector to attain global competitiveness. The peak customs duty rate (for non-agricultural products) has been lowered from 20 to 15 per cent, while the customs duty on capital goods has been brought under a 5-10 per cent band. There’s also some rationalisation in excise duties and in the duty structure in the petroleum sector. Particularly noteworthy is the reduction in corporate tax rates to 30 per cent (plus 10 per cent surcharge).

The readjustment of personal income tax rates is most welcome, as it addresses inflation and the consequent ‘bracket creep.’ This, together with the substantial rationalisation of deductions will further tax-friendliness, compliance and lead to higher collections.

What’s more the budget tackles concerns of urban India and provides for infrastructure upgrades in the seven mega cities. Initiatives will also be taken to develop Mumbai as a regional financial hub. The key role played by cities in terms of wealth generation and contribution to the exchequer, as well as in promoting social and cultural vitality, get direct recognition, perhaps for the first time.

The budget also breaks a new mould: It signals that development is not a zero-sum game. Rural and urban India both have to prosper; so do the farm sector and manufacturing, and that more tax-friendliness can co-exist with better revenue buoyancy.

Rating: 8/10

(The writer is Chairman of the Aditya Birla Group)

Other publications with Mr. Kumar Mangalam Birla's views on India Budget 2005-06:

• Financial Express
• Business Standard
• The Times of India
• The Hindu Business Line