Fisc on the mend

In my view, this Budget has tremendous clarity as to what this government will do over the next few years.

The government seems keen to bring fiscal discipline. The partial roll-back in excise duty, an increase in petroleum prices, targeting subsidies and setting a clear target till 2014 are positive steps. The target of 5.5 per cent fiscal deficit looks achievable with PSU divestment to the tune of Rs 40,000 crore and Rs 30,000 crore from the 3G auction. I would have liked to see some clear steps to reduce the size of expenditure, which is galloping.

The benefits to individual tax-payers will ensure that a slight increase in excise will not impact demand and thus growth will not get impacted. With deficit in check, interest rates shouldn't go up. We can look forward to higher growth, rates of our economy.

The increase in outlay of defense and additional provision for capital expenditure are timely, the same is true for internal security. Going forward, we as a country have to increase outlay in these two critical areas. FM has also tried to be 'green' in his approach by imposing coal cess and simultaneously giving benefits to solar/wind energy resources.

For the insurance industry there are two positives--one is that the service tax on ULIPs has been brought to the same level as mutual funds. This will reduce the cost of ULIPs further. Secondly, for small agents, the limit has been increased to Rs 20,000 for TDS, which will make things more convenient for smaller agents. For general insurance companies a clarification on payments made to re-insurers etc. would have been beneficial especially since the amendment is effective retrospectively.

Overall, it is a budget which should do the trick for higher growth with some help from the rain god.