The finance minister should be congratulated for presenting a Budget proposal that explicitly states the government’s resolve to accelerate the current growth rate into double digits over the coming years, while simultaneously spelling out a roadmap for fiscal consolidation. He has also increased the allocation for investment in infrastructure and provided additional tax breaks to incentivise individuals to participate in infrastructure financing.
If there is one caveat to an otherwise commendable effort, it is that save for the continuation of PSU disinvestments, the Budget has been light on structural reforms, which by themselves can provide a significant boost to investor confidence.
The announcement of a target date for implementing the goods and service tax and the direct tax code and changes in surcharge and MAT are forward steps in reforming and rationalising the country’s tax structure.
With fiscal deficit and market borrowing estimates along expected lines, the bond markets have breathed a sigh of relief. However, the overall borrowing programme continues to be challenging and could put further pressure on yields down the road.