This one takes the 'Make in India' mission forward

The budget presented in Parliament on Saturday by our finance minister is a prudent combination of considerations of economic development with social security needs. The objective obviously is to ensure that the benefits of development are shared by all sections of society.

Since the beginning of 2015, the economy had shown some signs of recovery. Inflation had tapered down, the current account deficit had shrunk, crude oil prices had halved and the stock market had been bullish in spite of the generally grim international situation. With a strong push, the economy had every chance pf moving forward with good momentum. Quite likely India will achieve the highest economic growth overtaking even China.
Jaitley's budget carries forward the 'Make in India' mission, which currently is more effectively aimed at defence production. There were, therefore, expectations that the finance minister would announce major reforms to drive the economy faster. The time was opportune because the NDA has a majority in Parliament. But the Economic Survey had made it abundantly clear that no big-ticket reforms were possible for a large economy like India.

Reforms had to be gradual, not in one big jump. Hence, it is preferred to reform the present systems in slow steps, so that there are no dislocations and there is easy acceptability. This is so not only because we are a large economy but also because we are a democracy.

Jaitley had indicated earlier that it was necessary for us to bring our tax system in line with internationally accepted norms. True to his word, he has taken the first step. The corporate tax will be reduced in four stages to 25% in four years. This is the rate of taxation prevalent in Indonesia, Malaysia and China, among other countries. The simplified lower rate will be a great draw for investment by domestic and foreign investors.

The implementation of goods service tax from next year will make a fundamental transformation to the system of indirect taxation, facilitate trade and expand resources with the Centre and individual states. Similarly, the National Agricultural Market will remove regional imbalances in supply of agri products, ensure a better price for farmers and check inflation.

Infrastructure is really the need of the hour because it's remained under-developed. In the present budget, the investment on infrastructure will go up Rs70,000 crore. The tax-free infrastructure bonds and the National Infrastructure Finance Company will help garner financial resources for infrastructure development.

Jaitley has made a special effort to introduce fiscal discipline. In 2015-16, the budget deficit has been limited to 3.9% and will be brought down to 3% in three years. Partly, the transfer of additional resources to states as recommended by the Finance Commission made restraint on deficit more difficult. The reduction in deficit will make it possible to check inflation, prevent overcrowding of the debt market by the government and bring about better integration between fiscal and monetary policies.

The increase in investment has to be matched by increase in savings in order to prevent the economy from being overheated. The changes in pension schemes and the increase in exemption limit for health insurance will increase national savings, and the reduction in fiscal deficit of the government will reduce the diversion of savings to consumption. The finance minister has thus been able to combine development with social security to ensure that the benefits of development are shared by all sections of society.

By Sanjiv Goenka, chairman, RP-Sanjiv Goenka Group