Budget 2017-18, coming at a time of global uncertainty, is a pragmatic, growth-oriented and smart policy statement, taking forward the reform agenda in a convincing and progressive manner. Its stand-out features are many and innovative.
Adhering to the path of fiscal prudence is a key message reiterating the Government’s commitment to sound macroeconomic management even when the situation calls for enhanced public spending. The high emphasis on infrastructure through big increase in government expenditure, particularly transport facilities and affordable housing, is very welcome as it would kick-start a new cycle of investment in downstream sectors.
Reduction of corporate tax for companies with less than ₹50 crore turnover is another pertinent measure that can greatly boost their competitiveness and encourage more job creation.
Consumer demand can be expected to receive a fillip with the higher allocation for rural and agricultural sectors, as also halving of tax rates at the lower end. The Budget has taken a step towards public asset monetisation with airport land in tier 2 cities, where the proceeds can be used for upgradation of airports. This is an innovative move, and will hopefully gain pace in other sectors in time to come.
Institutional reform is evident in the abolition of FIPB and listing of public sector enterprises. The FIPB was rendered redundant after continued liberalisation of FDI regime, and the Finance Minister has promised further opening up to foreign investments. The listing of PSEs is evidence of government’s effort to add efficiency to their operations, besides promising to raise resources.
Demonetisation goes a step further with the stress on digitalisation and formalisation of the economy, which will have benefits for tax revenue and a better investment climate over the longer term.
The Budget has also come out with an innovative electoral bond to clean up political funding, adding to the overall campaign against black money.
Going forward, a few areas require closer attention from the perspective of industry. While we greatly appreciated the relief in corporate tax rates for smaller companies, the larger ones too need remedies to become globally competitive. These companies generate significant employment and we look forward to lower tax rates as exemptions are phased out.
Further, the National Innovation Fund was announced earlier for boosting R&D. We would like to see a shift in R&D spending towards higher education institutes to bring it on par with the global average expenditure by universities, currently about 0.4% of GDP as compared to India’s average of 0.04%. This would also help to incentivise private sector outlay on R&D to make India a source of global innovation at a time when Industry 4.0 is rapidly converging on us.
There is one item in the Budget of introduction of 10% surcharge on the incomes between ₹50 lakh and ₹1 crore which we feel is not in the spirit of rewarding the honest taxpayer. The data on taxpayers mentioned in the Budget speech was eye-opening and it is important to expand the tax base.
Employment creation has been a central idea of the Budget, and the inclusion of leather and footwear for promotional attention at par with the apparel sector is laudable.
CII would like to suggest that the provisions regarding fixed term and flexible employment and incentives for formal employment be replicated across other employment-elastic and employment-intensive sectors such as automotive, food processing, and so on.
We also hope that the four labour codes would be quickly actioned.
The Budget crucially reassures investors that the strategic direction of the economy will remain on course. The need of the hour is to revitalise the critical drivers of growth of private consumption and investment, boost employment generation, create new infrastructure and stabilise the economy at a time of global turmoil.
The Budget delivers on all counts.
(The writer is president, Confederation of Indian Industry.)