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Budget 2012-13 has been presented against the backdrop of a turmoil in the euro zone and domestic political uncertainty.
The GDP growth forecast of 7.6 per cent in FY13 will act as a positive. With the increase in tax-free infrastructure bond limits to Rs 60,000 crore and allowing ECBs to part finance the rupee debt for power projects, some of the key initiatives augur well for the infrastructure sector. Besides, increase in income tax slabs leaves some extra funds in the hands of the common man.
The estimated fiscal deficit for FY13 has been projected at 5.1 per cent of GDP, which, though higher than the comfort level for the economy, seems achievable. The Budget has set a disinvestment target of Rs 30,000 crore. The divestment plans would help reduce fiscal deficit to some extent. However, the key part of the total government collection will be from its borrowing programme of Rs 4.79 lakh crore.
The increased tax collection from the service tax and the increase in excise duties, coupled with the government borrowing programme may lead to inflationary situation in the economy which will be closely watched by RBI in its forthcoming policy actions.
Overall, not a path-breaking Budget, but a very realistic one, with focus on infrastructure development by way of additional credit, tackling supply-side constraints and better handling of subsidies by providing for direct cash transfers to reduce leakages and also provide something to individuals with increased tax slabs and investment incentives.
Gagan Banga CEO, Indiabulls Financial Services
