The govt had its back to the wall: Kalpana Morparia

The government went into the Budget with its back to the wall, but has emerged with enhanced credibility after the exercise. The general expectation was an increase in populist measures and maybe even a rise in tax rate. But to the finance ministers credit, he has not succumbed to any of these and that is a big positive. Fiscal consolidation and reviving the investment cycle are obvious priorities. The finance minister has addressed both. The fiscal deficit is sought to be reduced by a substantial 80 basis point to 5.1 per cent of gross domestic product (GDP). Aiding the initiative are a fair bit of resolve in curbing non-Plan expenditure to eight per cent and an increase in indirect taxes and widening of the service tax net. The policy to limit subsidies to two per cent of GDP in 2012-13 and reduce these to 1.7 per cent in three years and focus on direct targeting of fertiliser and energy subsidies are medium-term positives. Subsidies budgeted for food and fertiliser also appear more realistic. A 22 per cent increase in Plan expenditure is positive for investment, as are various soft measures like removal of the dividend cascading tax, easier norms for external commercial borrowing, enhanced limits for infrastructure bonds and additional depreciation allowance. Calibrated follow-up policy measures and execution would be key to ensure India remains among the fastest growing economies.

Kalpana Morparia CEO, JP Morgan, India