With the general elections only a few weeks away, the much-needed relief to small farmers and tax sops for the salaried class in the Rs 5-lakh bracket will help the Narendra Modi government woo voters, say corporate leaders. While there were no tax incentives for large corporates, CEOs said rationalisation of the goods and services tax by the GST Council announced outside the Interim Budget has helped matters. “The finance minister has hit a volley of sixes — a victory for farmers and the middle class, two major pillars of our economy. Balancing both hosh and josh, the Budget will stimulate consumer demand and rejuvenate lives in rural areas,” said Harsh Goenka, chairman of RPG Enterprises.
Anand Mahindra, chairman of M&M, was earlier apprehending a populist, profligate budget driven by ‘election panic’. “I am just grateful that the relief to the key middle-class and farmer segments was delivered in a measured way without risking bankruptcy of the economy. This was a controlled, pump-priming exercise,” he said. The CEOs said distressed farmers would stand to benefit from several measures announced by the government on Friday. The cash support of Rs 6,000 per year to small farmers is a good beginning to increase their income. “However, more money supply into the economy should not lead to inflation and other adverse impacts,” warned Ashok Hinduja, chairman of Hinduja group. “Higher allocations for defence and capital expenditure should give a boost to the manufacturing industry and job creation. The fiscal deficit is stated to be 3.4 per cent of GDP, which is slightly higher than the figure expected by global rating agencies. But if the higher deficit leads to the creation of more goods and services, it will not affect growth.”
Prashant Ruia, director, Essar group, hoped the budget will have a positive impact on investors since growth in consumption will result in growth across various sectors. “The incentives in direct taxes are encouraging not only for the middle class, but also for the industry since it will lead to higher disposable incomes and, in turn, an increase in consumption. By the same logic, even the farm sector stimulus will benefit the industry in the long run. All these will collectively have an impact on interest rates,” he said.
The increased defence allocation (over Rs 3 trillion) is encouraging for the industry, especially in the defence-related sectors. “We hope that ‘Make in India’ in defence will result in a greater role for private industries in this critical sector. The thrust on MSMEs is also welcome as they have an important role in supporting large industries, achieving higher levels of indigenisation and generating more employment,” said Baba Kalyani, CMD of Bharat Forge.
The announcement of no tax on income up to Rs 5 lakh and a hike in the standard tax deduction for salaried employees will help increase disposable income for the middle and salaried classes and drive demand for mass products, the corporate leaders said. “But the need of the hour is clearly more productive job creation and gainful employment to meet the needs and aspirations of Young India. We hope to see this enabled through investments in small and medium enterprises and infrastructure investments, which seem to have slowed down," said Vivek Gambhir, managing director and CEO, Godrej Consumer Products.