It’s a pragmatic Budget with a bias to steady and consolidate last year’s gains. Overall, it’s non-populist, unless we see surprises during the year, and non-reformist, with no policy announcements on insurance, banking or retail. The importance of creating capacity in the key thrust areas has got due recognition. While there are no specific policy announcements, the emphasis on expanding the options for infrastructure funding, agriculture supply chain focus, larger allocation to education and, finally, a recognition of the importance of increasing the manufacturing share in GDP in the next 10 years are all terrific. But, execution will be key.
An increase of 17 per cent in social sector spending, the continuing spend through NREGA and a sincere attempt to integrate the rural economy with the mainstream are going to remain big drivers of the growth story. Some attempts to revitalise the infrastructure financing space, corporate bond markets and a Rs 20,000 crore recapitalisation of PSU banks are all welcome but an ecosystem that supports asset creation would be the key. The opening of external flows to fund infrastructure should be handled very carefully, given the money variables that can easily get out of hand. The last thing we would need is an external account problem, with the current account already running above average levels.
The headline-grabbing number was the fiscal deficit target at 4.6 per cent, which was much better than expectations. But, my concern is the composition and stickiness of expenditure rather than the number per se. Still heavy on subisidies, oil deficit and interest costs, it remains low on capacity building in the real economy. My personal view is that this Budget, like the last two, continues to consolidate the 8-9 per cent growth paradigm, but does little to lay out a break-out strategy.
Sanjay Nayar,
CEO & Country-Head, KKR India
