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Considering the high expectations and a constrained fiscal space, after the acceptance of the Finance Commission's recommendation of transferring a bigger share of the centre's tax collections to the states, the Finance Minister walked a tightrope. He balanced the imperatives of fiscal consolidation and of the need to increase public investment.
Investment in infrastructure is expected to rise by Rs 70,000 crores. Coupled with the increase in the railway plan, this is a significant boost. The new National Investment and Infrastructure Fund will get Rs 20,000 crore annually to support infrastructure projects. The decision to postpone the FRBM (Fiscal Responsibility and Budget Management Act, 2003) target is highly pragmatic given the urgency to kick-start the investment cycle and revive economic growth. After all, private sector capex is unlikely to pick up in the near term.
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Encouragement for financial services' growth, ease of doing business and entrepreneurship are in line with the government's focus on procedural and process reform. The proposal to create a new bankruptcy law to replace the Sick Industrial Companies Act and Board for Industrial and Financial Reconstruction is a positive move, underscoring the government's focus to address non-performing loans, which have risen as a result of the compression in economic growth.
Pratik Gupta
Head of Equities, Deutsche Bank India
