Comment: Gunit Chadha

We are encouraged by the Budget's broad goals

Despite a challenging macro environment, it was encouraging to see the finance minister continue on the path of fiscal consolidation by targeting a lower target of 4.6 per cent of GDP for financial year 2011-12 compared to 5.1 per cent in financial year 2010-11. As expected, the Budget contained various supply-side measures to address the inflation problem (such as incentives to improve food production, ambitious allocation for infrastructure projects etc). Social sector spending also got a major boost, rightly so, to make development more inclusive and equitable.

The Budget laid focus on the need for improving the investment environment and to that effect, the FII limit for investment in corporate bonds issued in the infrastructure sector was raised. It was also heartening to note that the government remained keen on liberalising the FDI policy further in the coming months. Tax collection estimates remained strong, indicating the government’s confidence in strong growth momentum extending into the next financial year while disinvestment proceeds are also expected to generate sizeable revenues. The excise tax rate was not raised, as it would help to improve profitability margin while some tax relief was given on the direct taxes front by raising the threshold exemption limit.

We are, therefore, encouraged by the Budget’s broad goals, which, while focusing on fiscal consolidation, will also help support the growth momentum and incentivise inclusive growth.

Gunit Chadha
Chief Executive Officer, Deutsche Bank