FM's bold steps will pay rich dividends

FM's bold steps will pay rich dividends

Saturday February 27, 2010 10:49 pm PST

The FM has managed to do an excellent balancing act with this year's Budget. His Budget is growth oriented and yet manages to address the issue of fiscal deficit in an effective manner. With doubts around the global economic recovery receding and positive economic data flow from India, the finance minister has managed to take some bold steps which will pay rich dividends.

 

The focus on the social sector is very welcome. With enhanced outlays in education, health and rural development, I expect clear dividends both in terms of reach and impact of the government's flagship programmes.

 

Agriculture has been a key focus area for the finance minister with enhanced investment in productivity and processing improvement measures and improvements in the supply chain. The concept of developing 60,000 'pulses and oilseeds villages' in rain fed areas will give a definite boost to production in these two areas in the days to come.

 

Quite rightly, financial inclusion too constitutes a key focus area with a target to cover all habitations with popu- lation in excess of 2,000. Recapitalisation of the public sector banks is a move in the right direction to secure health of the banking sector. New banking and NBFC licenses will surely help in increased penetration of the sector.

 

FM's bold disinvestment agenda is most welcome. After successfully completing disinvestment in PSUs like OIL, NTPC and REC during the current fiscal, the finance minister has reasons to be buoyant, setting a target in excess of Rs 25,000 cr during the coming year.

 

Continued investment in infrastructure, particularly in areas of road and rail transport and energy is also welcome.

 

Quite rightly the FM has chosen a calibrated approach on the economic stimulus roll back with a marginal increase in excise duty from 8% to 10%, but retaining the service tax rate of 10%. Keeping in mind the fact that world economy is not completely out of the woods, the Budget has preferred to continue with sops such as interest subvention for the exporters.

 

The finance minister has pleasantly surprised tax payers, particularly from the middle class, with some aggressive rationalisation of the income tax slabs. A tax payer with a taxable income of Rs 8 lakh stands to save more than Rs 50,000. Such a move is clearly aimed to increase disposable incomes and the consumption power of the middleclass.

 

The corporate sector, despite the over all growth orientation of the Budget could be a little disheartened by the increase in Minimum Alternate Tax (MAT) rate by 2%. This may adversely affect the internal resource generation capacity of the corporates.

 

The Financial Express

Sunil Bharti Mittal