Comment: Rana Kapoor

Strong and confident commitment to growth

In the Union Budget tabled today, the government succeeded splendidly in retaining its focus on agriculture, infrastructure and social spending; to set the pace for sustainability of growth, not only in the near-term but also uncompromisingly in the long-term, while simultaneously maintaining focus on fiscal discipline. The government acknowledged leakages from public programs and implementation gaps as serious challenges, to plug the loopholes by improving regulatory standards and administrative practices.

With average food inflation ruling in double digits over the last two years, the Budget addressed structural concerns in agri supply-chain management by announcing a slew of agri-reforms ranging from removal of supply bottlenecks to ushering in a ‘green revolution’ in eastern India, opening up mega food parks and encouraging private entrepreneurship in augmentation of storage capacity. A cumulative allocation of Rs 1,800 crore to augment agri production in six different sectors that witnessed wide supply-demand imbalances, accompanied by a rise in the credit flow to farmers by an additional Rs 1 lakh crore (growth of 27per cent) and an extension of the interest rate subvention as an incentive, is a positive move. Recognising the need to bridge the infrastructure deficit, the government not only raised the allocation to the sector by 23 per cent but also upped the FII limit for investment in corporate bonds (of residual maturity greater than five years) issued by infrastructure companies.

The government’s continued commitment towards inclusive growth is reflected in the 23 per cent higher allocation to the social sector, through flagship programs such as Bharat Nirman, MGNREGA etc, which account for 36 per cent of the total plan allocation. In addition, the government plans to introduce the Food Security Bill and target better financial inclusion by extending banking facilities to all unbanked areas with a population of over 2,000.

The Union Budget — through commitment of higher allocation to social, agri and infrastructure — ensures that India’s consumption-led growth story remains intact. It is commendable that the finance minister has strived to achieve this, while adhering to fiscal prudence.

Rana Kapoor
Managing Director & CEO, YES Bank