The Government has given special focus to infrastructure, manufacturing and financial services as the growth drivers for the next five years. Majority of the proposals signal continuity of the Government’s policy agenda on holistic development. Containing the fiscal deficit at 3.3% in FY20 is a commendable balancing act, even while prioritising investment as a growth engine leading to increase in capex at 7% yoy.
The proposal to deepen the bond market should help improve avenues available to raise capital. This, combined with the Government’s proposal to issue more foreign bonds should bring down capital costs, as seen from the initial reaction in the bond market.
Industry and Infrastructure
The Finance Minister’s investment plan of Rs50 lakh cr through a PPP model in building railway infrastructure for the period 2018-30, will give a boost to the Indian manufacturing sector. The manufacturing sector would also see long term growth with the proposed launch of a scheme to attract mega investment in sunrise and advanced technology areas. Investment of Rs100 lakh cr in infrastructure over five years is significant and will give a fillip to the overall economy.
The proposal to establish a National Research Foundation (NRF) is a welcome measure. The Government has rightfully recognised the need to promote research in the country, which would form the bedrock of future growth of the Indian economy. The provision of INR 400 Crores towards upgrading the quality of education is a good start but would need more fund allocation in the coming years.
The Sector will find more sources of funds opening up with the doing away of maintaining Debenture Redemption Reserve. Bringing parity with Scheduled Commercial Banks (SCBs) with regard to tax treatment on interest collected from ‘Bad and Doubtful debts’ should also help the NBFC sector. The additional tax benefit of Rs1.5 lakhs (making it Rs3.5 lakhs) for ‘affordable housing’ finance will boost the housing and finance sector.
The one-time, 6-month partial credit guarantee to PSBs for the first loss up to 10% amounting to INR 1 lakh Crores is a welcome move.
The allocation of Rs80,000cr towards fertilizer subsidy on both Nutrient Based Subsidy (NBS) and Urea should help reduce the subsidy backlogs. Forming 10,000 new Farmer Producer Organisations (FPOs) will further strengthen the agriculture sector.
The setting up of a social stock exchange under the regulatory ambit of SEBI to aid social enterprises and voluntary organisations to raise capital via equity, debt or mutual funds, is a good initiative.
-M M Murugappan, Executive Chairman, Murugappa Group