CII has welcomed the Budget 2013-14 as a growth-oriented Budget that would kickstart the next cycle of investment. Coming in the backdrop of challenging global and domestic macro-economic conditions, the Budget makes laudable efforts to optimise growth drivers while addressing inclusive and sustained development. CII is happy that many of its suggestions have found mention in the Budget.
“The Budget meets most of our concerns regarding fiscal consolidation, investment incentives, and inclusive growth. These are in alignment with CII’s submissions in its pre-Budget Memorandum to the Finance Ministry,” said Mr Adi Godrej, President, CII. Fiscal deficit has been maintained below the target at 5.2% for 2012-13 and at 4.8% for 2013-14.
Mr Godrej added, “Budget 2013-14 promises to adhere to the fiscal deficit roadmap as laid out by the Finance Minister last year. This will boost growth, curtail inflation and help in ratings. Emphasis on agriculture, technology and innovation and science and technology is very welcome as it adds to future growth prospects.”
CII particularly welcomes the stress placed on inclusive growth and development. Plan expenditure has been raised by almost 30%, and inflationary pressures due to supply side measures are sought to be dampened. This would encourage further monetary steps to lower interest rates which would spark investments. The expenditure on education and healthcare has been increased substantially, while skill development has received a big boost. This is in line with CII’s emphasis on enhancing human talent capacities.
The slide in investments and savings, particularly household savings, would be arrested through targeted measures. Investment allowance of 15% in plant and machinery was a key recommendation from CII and should incentivise corporates to undertake new projects. For savings, positive steps have been taken to encourage household savings in the financial instruments, especially capital markets and low-cost housing. This would add to investible resources, noted the CII press release.
CII is happy to note that the Budget aligns with its recommendation for not making changes to the indirect tax rates, which would have deepened the slowdown in industry. On the other hand, industry would welcome the possibility of a consensus emerging on GST and the new tax being implemented soon, as mentioned by the Finance Minister in his speech. CII feels that the implementation of GST would add upto 2 percentage points to GDP growth rates.
CII welcomes the measures announced to increase investment in the infrastructure and the energy sectors. These include measures on the financing side such as allowing tax free bonds of upto Rs 50,000 crore and the operation of infrastructure debt funds. In addition, the Finance Minister has promised to address specific bottlenecks in sectors such as roads and oil and gas.
The measures to encourage micro, small and medium enterprises should go a long way in helping these firms to scale up and invest in technology. The three-year extension of non-tax benefits after a unit attains medium size would encourage growth and employment creation.
However, CII believes that introduction of Commodities Transaction Tax could impact non-agriculture commodity transactions adversely. In the oil and gas sector, shift from cost recovery to revenue sharing is of concern as it could hamper exploration in remote areas.
The target of raising nearly Rs 56,000 crore by way of disinvestment is welcome and CII hopes initiatives will be taken to spread the issues throughout the year. Overall, the Finance Minister has done a commendable job in raising revenues wherever possible and allocating the expenditure judiciously.