Budget 2016: Crafted with an eye on rural populace, says Sanjiv Goenka

Sanjiv Goenka
Chairman, RP-Sanjiv Goenka Group

The budget has been carefully crafted to meet the aspirations of the weaker sections and indirectly to enable industry to get back to growth and profitability. It gives great attention to the actual problems of the farmers, to the needs of transportation which can ease and lower costs, and to improve the quality of jobs by providing for education and health. The growth in 2015-16 was estimated by CSO at 7.6%. It is surprising that Economic Survey anticipates growth at 7-7.75% next year in spite of the powerful growth forces that the budget is likely to release. The push to growth will come from domestic factors, mainly investment in transportation and agriculture.

Planned investment in the public and private sectors was over Rs 17 lakh crore five years back. It has dropped to Rs 4 lakh crore now. What is more, private investment which usually exceeded public sector investment had fallen because of shortage of demand which resulted in excess capacities in industry. The budget is designed to generate that demand from different sectors and enable industry to grow faster.

Agriculture has been given special attention. That is because in the past two years monsoon was deficient and production declined. Apart from the agricultural credit which is targeted at Rs 9 lakh crore, investment will be made in irrigation which will cover 28.5 lakh hectare, and the provision for MNREGA will double farmers' incomes. Similarly, investment has been planned for transportation. Total outlay on roads and rails will be 2.8 lakh crore. Additionally, 160 airports and air strips will be revived to ease travel to smaller cities. It is undoubtedly encouraging that 100 per cent electrification of villages will be achieved by 2018. This will improve productivity and incomes in the farming community.

It is important as well that the finance minister has addressed the need for education and health. These are the software of development and most countries that have developed fast have prioritized these two sectors. With education and health people can go in for better jobs with higher incomes.

While these investments are desirable and necessary by themselves, they will have a favourable secondary effect. Surely, the investment will create demand for a variety of goods and services and the income of workers and farmers will generate consumer demand for the industry as well. This will help industry to utilise capacities better and induce private sector investment.

The FM has reduced the rate of corporate taxation to 25% for new companies without any change in the taxation of existing companies. The facilities provided for 'Make in India' will increase the share of Industry in GDP and generate 100 million jobs. Start Ups which have already imparted dynamism in the financial and distribution sectors have been given special attention. Tax exemption for the first three years and the increase in turnover for presumptive taxation in respect of other businesses will stimulate their growth and generate jobs.

The FM has achieved the daunting task of reducing fiscal deficit from 3.9% to 3.5% in spite of the huge additional expenditures while reducing the revenue from direct taxes and taxing only luxury goods. The lower fiscal deficit and the investment in agriculture will restrain inflation which as the Economic Survey predicts may be around 4.5% in 2016-17.