Jaitley wants to bring growth back

The focus of Union finance minister Arun Jaitley’s maiden Budget on manufacturing, infrastructure, job creation, aggressive skill-giving in skilled and traditional jobs, education, sanitation, increasing household savings, putting purchasing power in the hands of the landless farmers and the poorest of the poor reflects the deep thinking he has invested in the architecture of the Budget.

Whilst talking of financial constraints in his introductory paragraphs, he built the groundwork for announcing the opening of the economy to foreign direct investment in defence and insurance and to encouraging greater private sector participation through public-private partnership in all new infrastructure projects. Since the PPP model had not taken off earlier, he set aside Rs 500 crore for creating a new institution of “3 Ps” that would help redefine the new PPP framework.

His banking on public sector units (PSUs) to kickstart investment, which, in turn, would spur growth, was more imaginative than that of his predecessor, P. Chidambaram, who arm-twisted the PSUs for special dividends and hefty dividends to achieve the fiscal deficit target he had set himself. Mr Jaitley is expecting PSUs to invest Rs 2,47,941 crore in the current financial year to create a virtuous investment cycle.

The aim of the Budget, as Mr Jaitley said, was to revive the investment climate in the country, lay emphasis on fiscal consolidation and also provide some relief for the common man in the form of income-tax rebates. He has provided savings of Rs 10,000 crore for taxpayers by raising the exemption limit under Section 80C to Rs 1.5 lakh from Rs 1 lakh. He has deftly handled the retrospective tax amendment issue in the case of Vodafone by saying that cases already in the courts will see their logical conclusion. But all the other cases arising from this amendment would be looked into by a high-powered commission before any decision is taken. He also promised to bring in GST by the end of the year.

One would be disappointed if one was expecting out-of-the-box thinking by Mr Jaitley as there were no sparkling, spanking new ideas. The one new idea was the proposed constitution of an expenditure management commission that would look into various aspects of expenditure reforms to be undertaken by the government. including overhauling the subsidy regime, particularly for food and petroleum. Also, the Rs 10,000 crore venture capital fund to be set up for the SME sector is a great idea.

Perhaps the stock market reflected the tightrope-walk that Mr Jaitley undertook to please both India and Bharat. As he began his speech on all the good things for children, poor and the marginalised, the Sensex sank over 400 points, but did a robust U-turn as he announced various incentives and sops for the financial sector.