Make or break. This is what a lot of people had chosen to call today's Union Budget. Of course, it was the second budget that the Government was presenting after assuming office. But in many ways it was the first real test of the Modi led NDA and its reputation of being more development oriented than populist.
Now that the proverbial cat is out of the bag, has the Government really ended up walking the talk? Or to use another animal metaphor, has the Finance Minister Jaitley pulled out more reform-rabbits from his hat or were there more parrots of populism?
At the risk of sounding fence sitters, we are of the view that there's just enough for everybody in this budget and is therefore likely to keep most parties interested.
For starters, Jaitley has kept his promise on fiscal consolidation albeit the target of taking it to 3% of GDP gets delayed by a year and will now be possible to achieve only by FY18. The current fiscal though is likely to end with the deficit touching 4.1%.
Why this delay you would ask? Well, the Finance Minister has made it clear that he might as well focus on infrastructure investments than try and take the fiscal bull by the horns immediately. And this is certainly not that bad a move we believe.
Nor has Jaitley opted to remain tight fisted when it comes to the rural poor. As a matter of fact for a party that was seen as a staunch opponent to the rural employment guarantee scheme called as MNREGA, the Government's budgetary allocation for the same this year is supposed to be highest ever. There can of course be debates around whether this is the most efficient use of public funds. But at a time when the rural poor are not exactly in the best of health, the outlay may not be such a bad thing after all.
The need for infrastructure investments is certainly not lost upon the Finance Minister. He is only too well aware of its importance if we are to come anywhere close to fulfilling the dream of double digit growth rate. Therefore, it was not surprising to see him mention that everything put together, investments in infrastructure will go up by a significant Rs 700 bn over the previous fiscal.
What was also encouraging was the planned establishment of a National Investment and Infrastructure Fund with an annual flow of Rs 200 bn in it mostly as equity which can then be leveraged many times over.
Proposing ways to monetise India's huge gold reserves was another big positive for us and would result in increased liquidity in the market.
If there's one group that's likely to walk away most happy from the budget it is India Inc we believe. Here, Jaitley not only promised a reduction in the top tax rate to 25% over the next four years but also exuded confidence about a possible roll out of the Goods and Services Tax (GST) by April 2016.
However, whether this will result into more investments and give a boost to the 'Make in India' initiative remains to be seen.
As far the income tax is concerned, there's been no change in the exemption limit however deductions in the form of medical spends, for travel as well as pension savings may not end up entirely disappointing the salaried middle class.
Some of the other notable features according to us were the reforms proposed in the bankruptcy laws and outlining of various stringent measures to deal with the scourge of black money.
Therefore, in summary, while the Union Budget for the year 2015-16 may not exactly be hailed as hugely reformist, it will be fair to say that the finance minister also does not seem to have done a significant harm to his and the current Government's reputation.
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