Union Budget 2013: pragmatic and attuned to global and domestic economic realities

1st March, 2013

Mr. Kumar Mangalam Birla
The Economic Times
01 March 2013

The Union Budget 2013-14 is pragmatic and attuned to global and domestic economic realities. While there are no 'big bang' announcements, there are no negative or regressive steps. The budget also addresses issues related to inclusion without being overly populist.

Overall, the finance minister has flashed the right signals as regards continuity and consistency on the path of reforms. The minister's commitment to winning back the trust and confidence of entrepreneurs and investors, and making India an easy place to do business in, is reassuring. The finance minister struck a positive note by articulating the objective of getting GDP growth back to the potential 8 per cent range.

It is encouraging that the minister stressed on the strong linkage between higher growth and inclusiveness. Also laudable was the emphasis on tapping the demographic dividend by educating youth - including a sharper focus on vocational training, so as to open up employment opportunities. The greater accent on empowerment of women and gender equality is most appropriate.

There are several measures aimed at stoking growth. Several large infrastructure initiatives have been announced, including major extensions of the inland waterway network and two new major ports. Investment in industrial corridors is being considerably stepped up. The creation of a new authority for the road sector will facilitate faster implementation of road projects. There are incentives aimed at promoting the manufacture of semiconductor fabrication units, an essential backbone if India is to develop competitive advantage in new-age technologies.

The coal sector also stands to get a boost from Coal India being allowed to partner with the private sector in mining activities. The oil and gas sector is also being given a renewed thrust, through measures such as shifting from profit-sharing to revenuesharing, faster clearances for exploration blocks, resolution of pricing issues and development of shale oil resources.
The additional incentive for first-home purchases will also boost the mass housing market. The restoration of the investment allowance will certainly help to galvanise project activity.

The step-up in infrastructure spending will be supported by the setting up of more infrastructure debt funds and a substantial increase in the issuance of tax-free bonds. An attempt is also being made to enlarge the role of post offices in savings mobilisation efforts. An attempt is also made to boost the capital markets, particularly the debt segment. There is a major emphasis on stepping up FII and FDI flows, and both of these are considered critical to reining in the current account deficit.

The finance minister has not missed out on innovative ideas. There is an effort to promote waste-to-energy projects, in order to deal with the growing mountain of municipal waste. The idea of a bank of, by and for women surely deserves kudos. The task of restoring the Indian economy to a high-growth track, even while tackling inflation, and fiscal and external imbalances, is challenging.

But the finance minister has demonstrated his resolve on controlling expenditure, pruning subsidies and stepping up reforms. On balance, the Budget does reinforce the resolve.