We are getting back on the corrective path: Kumar Mangalam Birla

During the Budget speech, the FM acknowledged that the economy's growth momentum has slipped significantly from its potential growth rate of 8 per cent; and mentioned categorically that "without growth there will be neither development nor inclusiveness".

Indeed, the FM has taken several steps to kick-start the growth engine in the last few months, undertaking prudent reform measures to tackle fiscal deficit and current account deficit challenges. It is heartening to note that the process has been carried further.

The investment allowance for companies investing Rs.100 crore or more in plant and machinery during the next two years is a big positive, placing the manufacturing sector right at the centre to revive growth. FM's announcements on two new major ports, additional 3,000 km of roads in the first six months of the next fiscal, two new industrial corridors, doubling of the tax-free infra bonds and encouragement to infra debt funds shall hopefully address some infrastructure-related bottlenecks.

The Budget has attempted to boost the savings rate with the liberalisation of the scheme for first-time equity investors and introduction of inflation-indexed bonds. Measures to spread insurers' reach were also mentioned. If the savings rate responds positively, that should — in itself — help mitigate some risks with respect to the current account deficit.

Fiscal deficit has been a key concern area for rating agencies and investors. This Budget is reassuring in the sense that we are getting back on the corrective mode. Despite a lot of scepticism some months back, fiscal deficit has been capped at 5.2 per cent of GDP in the current year. Next year, it will d;rop further even after providing for all schemes for inclusiveness — including National Food Security Scheme and welcome initiatives targeted at women, youth and poor.

Given the fiscal situation, the FM had to look for additional resources. The surcharges on direct taxes and on the income tax for super-rich need to be seen in that light. From a medium-term perspective, it is imperative to widen the tax net so as to boost the buoyancy of tax collections.

Overall, I believe that the Budget reflects a very clear diagnosis of the ills affecting our economy at this juncture, and seeks to address those while maintaining the lakshman rekha of fiscal discipline.