A budget for growth, stability and pragmatism

This year’s Union Budget is a pragmatic exercise at growth and stability in the backdrop of the challenging year gone by and the broad consensus needed for various policy measures. It goes further to set a direction for fiscal consolidation to ensure long term stability and sustainability.

The last fiscal has been a challenging year for the economy. Both global and domestic factors resulted in a moderation of economic activity, led to persistent inflationary pressures and contributed to deterioration in the current account and fiscal position. Budget 2012 has to be seen in the context of these developments.
The Budget seeks to address the imperative of fiscal consolidation. In this context, the intention to contain subsidies at 2 per cent of GDP next year and 1.75 per cent of GDP within three years is laudable.
Greater efficiency in distribution and lower leakage through use of Aadhaar are key in contributing towards this goal.
The Budget seeks to revive the growth momentum in the economy with a focus on infrastructure developm-ent, agriculture & rural eco-nomy and inclusive growth.
Specific measures regarding the infra sectors, inclu-ding permitting external commercial borrowings, reduction in withholding tax and exemptions in customs duty are positive steps towards addressing some of the current challenges being experienced by these sectors. In addition, outlays in critical sectors such as agriculture, education, hea-lthcare and rural development have been enhanced.
Overall, the Budget adopts a pragmatic approach towards addressing the needs of the economy and managing the fiscal position. Continued incentives to critical sectors emphasise the government’s focus on growth. At the same time a reduction in fiscal deficit thro-ugh increased efficiencies in the subsidy and government spending as well as higher revenue generation has been emphasised. In addition, necessary policy and administrative measures to facilitate the execution of investment plans would need to be pursued.
The slowdown appears to have bottomed out and some pickup in growth can be expected next year. In the long term, the fundamental of the Indian economy coupled with appropriate fiscal policies and investments in key sectors should take India back to a higher growth trajectory.

(The writer is the CEO of ICICI Bank)

By arrangement with Financial Chronicle

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