Sitharaman's maiden Budget is high on policy and expenditure allocation

The maiden budget of our first woman FM is high on policy and expenditure allocation but low on complex changes in income tax provisions. With a few structural changes in the GST law proposed, it will become easier to comply with. 

Of particular note are the policy announcements on Jal Shakti, infrastructure investments, and India’s 
added soft power. Affordable housing, women entrepreneur financing, MNREGA, pension to retail traders and shopkeepers, and fisheries, are all strategic in nature and augur well for boosting purchasing power and expenditure benefits for the middle of India’s population pyramid. 

On the direct tax front, the enhanced burden on the above Rs 2 crore taxable income bracket, will be substantial. Particularly hard-hit will be the Rs 5 crore-plus bracket, where the tax burden will rise to almost 42 per cent! 
The incremental corporates that will bear tax at 25 per cent will be few with the turnover criteria raised to Rs 400 crore. The STT reduction on option transactions will have only a marginal impact. The overall reaction to these changes has been a drop in the indices of an unexpected magnitude.

Taking a longer term view, it will be interesting to see how the fiscal rectitude, a thrust on FDI liberalisation, a move to encourage swifter flow of credit to the MSME sector and the first loss protection for NBFC portfolio sales to PSU banks, open up the instincts of the private sector to start investing. These are good steps, but will have a lagged implementation impact. 

The real impact must be judged in conjunction with the provisions already made in the interim Budget to provide a direct transfer to farmers. The combination of policy interventions will make for a heady mix of signals, which if captured clearly by Indians, will change the mindset about investing and consuming.

This Budget will be judged on the following criteria: Will it encourage more savings and investments from the private sector? Will it encourage a massive boost for the start-up world? Will it encourage the international community to invest more? Will the states enhance their implementation capabilities to deliver the last mile to citizens? Will the macros stay stable enough during the lag period to permit a transition to a steady 
8 per cent pa growth in GDP?

The answers will come from every Indian and every international investor. Will the very possible goal of a $ 5 trillion economy come true? We will need to wait and watch, but with active participation in the effort.

A very striking feature of the Budget is the raised target on disinvestment. A target of Rs 105 trillion is truly unprecedented but strangely it seems possible to achieve. This is largely thanks to the preparation already done as continuity was assumed. The tucked away takeaway from the Budget speech and the detailed papers is that the whole range of options will be exercised. Also the signal that less will be borrowed proportionately also creates the possibility of private access to resources being enhanced. 

With lower borrowing and no big spending plans on subsidies, a genuine attempt to attract private investments is being created. This may, coupled with doused expectations on inflation, actually deliver a 7.75 per cent growth rate. This is indeed a blue ocean strategy, reflecting the colours used in the Economic Survey. 
The writer is chairman, Baker Tilly DHC



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