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Budget 2020: Bridging The Gap

The holistic focus on doubling farmer’s income in the rural area is commendable

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The Finance Minister has presented a credible and pragmatic budget, which lays down a coherent blueprint to infuse fresh momentum to the economy that would address the aspirations of the new India. A growth-positive and inclusive Budget, it has pushed the right levers to help revive consumption and investment demand even while addressing the compelling issues of employment generation, rural stress and fiscal prudence. 

Growth assumptions are well anchored with nominal GDP expected to grow by 10 per cent. Tax revenues are forecast to grow at about 12 per cent, a tad optimistic but achievable. Against this backdrop, policymakers continue to maintain fiscal prudence in FY21, with the fiscal deficit targeted at 3.5 per cent of GDP, which is well within the bounds of the Fiscal Responsibility and Budget Management Act. This confirms a balanced and responsible approach of the Budget to fulfil the multiple objectives of India while ensuring fiscal credibility.  

The holistic focus on doubling farmer’s income in the rural area is commendable. The sixteen action points enunciated in the Budget, including encouraging states to adopt model laws prepared by the Centre, are meant to ensure the competitiveness of agriculture. Similarly, schemes such as Kisan rail for building national cold chain for perishables, promoting dairy and horticulture, enabling farmers to set up solar power generation capacity on barren lands, among others, would go a long way to build the productivity of agriculture and augment income levels within the rural precincts.

The government has continued with the move to significantly upscale infrastructure development. The National Investment Pipeline has plans of spending Rs 103 lakh crore over the next five years on a wide range of projects such as housing, safe drinking water, warehousing, irrigation projects, etc. The proposal of incentivising sovereign wealth funds to invest in infrastructure as also providing equity support to IIFCL and NIIF to fund NIP is the other groundbreaking measures which bear testimony to the government’s commitment to bridge gaps in infrastructure.

Another key feature of the Budget is the proposal to create five new smart cities in collaboration with states in PPP mode. This would go a long way to harness the economic potential of cities and enable them to maximise the benefits from the upcoming economic corridors, revitalisation of manufacturing activities and use of emerging technology. 

The Budget has announced a clutch of measures to incentivise investment in manufacturing. The focus on specific sectors, such as electronics, technical textiles, MSMEs, startups and exports, is noteworthy. Besides, the provision of extending concessional 15 per cent corporate tax to power sector would attract investment in electricity generation. Some of the other initiatives such as abolishing dividend distribution tax for corporates, introducing the vivaad se vishwas scheme for direct tax disputes, introduction of faceless appeals and embedding a tax charter in the statute are strong measures to promote investment in manufacturing and support ease of doing business.  

The Budget recognizes the importance of harnessing new technologies and their potential to transform the economic future of the country. It promises to take steps to develop new-age skills in areas such as analytics, artificial intelligence, Internet-of-Things (IoT), 3D printing, drones, quantum computing and robotics. 

The Finance Minister has made some bold moves in the social sector. For instance, allowing FDI and external commercial borrowing for the education sector will help strengthen the private sector and bring in quality higher education. Similarly, core issues such as safe drinking water, wellness and sanitation which support the health vision are commendable. Overall, a well-rounded Budget that addresses every section of the society as well as industry and business.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Vikram Kirloskar

The author is the President of CII

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