It is true this time around expectations were low. Yet it is very pleasing to note that expectations have been well exceeded.
Under the circumstances, this has been one of the best budgets in the recent times. The Finance Minister has not only managed to move on the path of financial prudence but also has done enough to sustain the growth momentum. The fiscal deficit for next year is budgeted at 5.5% GDP which is a fairly comfortable figure for a developing economy like India. About Rs. 660 billion of non revenue, non recurring receipts by way of disinvestments and 3G auction have helped the finance Minister to refrain from aggressive tax increases. A modest 2% hike in excise duty was already expected and will be taken in stride by the industry. The most important impetus however will come from lower income tax incidence at individual level. Savings of Rs 51500 for a taxable income of Rs 8 lac p.a. and a further possible saving of Rs 6000 in tax, for investment in tax free bonds, will leave higher disposable surplus with the households. That will help consumption story to continue and driving demand growth for fast moving consumer goods, auto, housing etc. That has cascading impact on other sectors.
The continued domestic consumption led growth coupled with fillip for infrastructure investment will make it viable to achieve 9% growth in GDP and as finance minister said, ‘with some luck’ (I would say luck would play by way of monsoon for agriculture and global stability to help capital for private investments) growth can accelerate to 10% p.a. in two years time.
The above is an excerpt published in The Economic Times