Shyamal Majumdar: No damage done

Arun Jaitley has presented a Budget that will be taken as a big relief by almost all stakeholders

Finance Minister Arun Jaitley seems to be a firm believer in the dictum that no bad news is good news.  Mr Jaitley has done his reputation no harm by presenting a Budget that will be taken as a big relief by almost all stakeholders.

The best part of the Budget is that the government has stuck to the path of fiscal prudence and has resisted the temptation of going in for fiscal activism in the backdrop of a very uncertain external economic environment. It was a big relief that Mr Jaitley agrees with the good old wisdom that good policy housekeeping should be the cornerstone for India. Very few would quarrel with the 3.2 per cent fiscal deficit target set by the Budget as it is only a minor deviation from the original target. A major slippage would have affected credit ratings and capital flows, irrespective of the Economic Survey’s dismissive approach towards global rating agencies.

Moody’s, for example, has already voted for the Budget and said it expects the deficit targets to be achieved, although there will be limited room for slippage in case the economic environment turns less favourable, given significant spending commitments and hurdles to a rapid increase in revenue collection.  

Though India Inc’s big boys will be disappointed with the Budget’s refusal to reduce corporation tax for them, almost 95 per cent of India’s corporate sector with turnover of up to Rs 50 crore will celebrate the tax reduction by 5 per cent to 25 per cent.  It is, however, debatable whether creating two sets of companies for tax treatment is a good idea.

Some of the big companies were also hoping that the rate of MAT will be reduced in line with its goal of reducing the headline corporate tax rate to 25 per cent.  However, instead of that, the rate has been retained and a higher period of 15 years for carry forward for future credit claim has been provided, instead of the existing 10-year period.  This is only a small consolation.

 

Similarly, while the Budget has dashed hopes of a favourable tax regime for people in the higher income bracket, those up to Rs 5 lakh annual income have reasons to cheer.

A masterstroke in the Budget was the reforms in political funding by limiting the amount of donation to a political  party by a single source up to Rs 2,000.

While a lot of noise has been made about the Budget’s impetus to the Infrastructure sector by providing a record Rs 3,96,135 crore for development of roads and highways, enhancement of storing capacity of crude oil, civil aviation, solar energy development, the fact is it is a minuscule amount.

Overall, however, these disappointments may not mean much. The Budget's focus was clear -- FUTURE -- a term coined by Prime Minister Narendra Modi. That means the Budget was focused on the areas that matter for a political party -- farmers, underprivileged, transparency, urban rejuvenation, rural development and entrepreneurs. Mr Modi's party would be happy with this focus in the run-up to the elections in five states.