Budget & Money: Comment

On expected lines

The Budget supports long-term growth by spending on agriculture, ediucation and offering tax breaks to the middle class, but holds little for the critical infrastructure sector and lacks measures to tackle issues such as inflation.

The decision to waive loans to small and marginal farmers is welcome, but any benefits given must reach the intended beneficiaries. Moreover, a longer-term solution that enhances these farmers' productivity is necessary.

Another important area addressed by the Budget is the development of the country's massive and youthful talent pool through increased spending on education and health.

What is sorely lacking are moves to support infrastructure development. Budgetary allocation is meagre. While private investment is on the rise, significant public investment will have to continue for several more years to meet the demand from the fast-growing economy for transport, power and other services.

Another area of concern is the inflationary impact of some of the budgetary moves. While tax breaks for the middle class are welcome, the resultant increase in consumption will add to inflationary pressures. The government could have countered that through greater reductions in customs and excise duties.

Neeraj Swaroop
Regional CEO, India and South Asia, Standard Chartered Bank

A rural flavour

The Union Budget's focus on education and health, especially for the rural sectors, as well as a significant thrust on agriculture, reiterates the Finance Minister's commitment towards an inclusive growth.

In line with the rural focus of the Budget, the outlay for Bharat Nirman has been increased, which will benefit development of rural infrastructure, including roads, power, and water supply. Tourism and hospitality have also received impetus through a provision of five-year tax holidays.

The waiver of farm loans will greatly benefit the agricultural stakeholders by resuscitating farmers back into productive agriculture participation, as well as facilitate cleaning-up of banking portfolios.

This should provide a significant multiplier to the agricultural community and extract them from a vicious cycle of indebtedness, with productive channelising of their farming properties. At the same time, though, this is a short-term strategy that does not seriously address structural issues.

Rana Kapoor
MD & CEO, Yes Bank

Lots of goodies

The overall Budget strategy is to provide a counter-cyclical support to growth, especially through greater allocation to the agriculture sector. Among other initiatives, the one-time wavier of agricultural loans will be particularly helpful in providing succour to the farmers. The scheme will, however, cost Rs 60,000 crore to the exchequer and it will be interesting to understand how this waiver will be funded.

The Budget plan of exceeding the fiscal responsibility legislation mandated reduction in fiscal deficit to 3 per cent of GDP by March 2009 is laudable. That will ensure the government's market borrowing programme does not put undue pressure on the resources of the banking system and interest rates.

For the financial sector, initiatives to develop the corporate bond market and exchange traded currency and rates derivatives market are steps in the right direction. Also, withdrawal of the banking cash transaction tax by April 2009 will help reduce the burden on banks for administering this tax.

On the revenue front, tax sops to individuals, a reduction in the CENVAT rate and an unchanged peak customs duty will be helpful in boosting economic activity. The tax code broadly remains unchanged, which is good for the investment climate in the country.

Meera Sanyal
Country Executive, ABN AMRO India, and Chairperson, ACES

Cautious optimism

The present Budget has dealt with the threats of inflation, slowing down of growth and drop in consumer demand. The steps of dropping excise and custom duties, and increase in tax slabs will help us overcome the threat from a global economic slowdown, which is the caution part of the optimism Mr Chidambaram has talked about. The Budget continues to focus on our social obligations and to consolidate our demographic dividend.

The focus on education and skill enhancement, healthcare and urban infrastructure are rightly placed. The decision to set up a Rs 50-crore fund for the conservation of the tiger needs to be especially commended.surcharge for Small and Medium firms/companies having income of less tor individual and eliminating surcharge for Small and Medium firms/companies having income of less than Rs.1crore.

Imposition of Secondary and Higher Education Cess of 1 per cent was clearly against the general expectation of reduction in tax rates.

The surprise package has come for the IT companies who have now been brought into the ambit of MAT.

Uday Kotak
Executive Vice-Chairman and Managing Director,
Kotak Mahindra Bank