The writer is managing director, Kotak AMC Ltd.
A budget for Bharat and India
Both fiscal prudence and growth have remained priorities.
For the first time, an accounting professional (a merit ranked chartered accountant) presented a budget which balanced the needs of an election-bound government and an economy wanting to grow at a faster pace for better inclusion. It is a budget which boosts consumption through support to farmers and the rural economy, by providing direct income transfer, to middle-class taxpayers through tax rebates and to entrepreneurs through ease of doing business. More importantly, the path of fiscal prudence is not missed while creating a growth momentum for the economy.
The budget comes against the background of pioneering work done to make India more healthy through Swachh Bharat and Ayushman Bharat missions. Most of the places I visited in the last few years have seen a remarkable improvement in cleanliness. Work has also been done to make India more tax compliant. Our tax to GDP ratio for the bulk of our history was comparable to poor African nations. Through the launch of progressive taxation like GST and disruptive reform like demonetisation, the tax base has been expanded by more than 60 per cent in the last five years.
With the promulgation of insolvency laws, bankers have the authority to discipline big borrowers and recover their dues. Indians invest a large part of their savings in gold. This results in foreign exchange reserves being spent on the import of gold. Índia is like a patient who wants to improve her health but is donating blood rather than receiving a blood transfusion. Our import of gold is far more than the net foreign direct investment received in the last 17 years. This is despite the fact that in the last few years, Índia has become the largest FDI recipient in the world, overtaking China. The launch of gold bonds and the improvement in tax compliance have led to an increase in financial savings.
Much has been done to tame the Mahisasur of the economy — inflation. Through fiscal and monetary discipline, inflation has been brought down from double digits to low single digits. Inflation is a silent killer. It hurts the poor most.
The budget introduced the path-breaking provision of an income transfer of Rs 6,000 per year to 12 crore rural families. This will transfer Rs 75,000 crore to poor farmers every year. This, along with the increase in minimum support prices and the MGNREGA allocation, will support rural consumption.
Lower-middle class taxpayers will have more disposable income because of the tax rebate for income up to Rs 5 lakh and the relaxation on capital gains with respect to investment in a second property. They will also benefit from the relaxation of tax on notional rental income of a second self-occupied property.
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