The Union Budget has introduced various reforms to boost economic growth and put India back on track to become a $5 trillion economy. While the budget may not have a big bang announcement, it has significantly stepped up expenditure for the next financial year to ₹30.42 trillion from the revised estimate of ₹26.98 trillion in the current fiscal. It is thus evident that the government will aim to spend aggressively in the new fiscal and put money in the hands of citizens through its various programmes, including lowering of personal income tax, to boost demand.
At the same time, the government is creating room for reviving private sector investment by rolling out the National Infrastructure Pipeline that envisages creation of 6,500 infrastructure projects worth ₹103 lakh crore over the next five years. A rapid implementation of these projects that are backed by efficient financing mechanism holds the key to revitalising the growth engine and propelling GDP towards $5 trillion mark. The bevy of projects promises to transform the hinterland and build robust infrastructure across sectors like housing, safe drinking water, clean and affordable energy, healthcare, world-class educational institutes, modern railway stations, airports, bus terminals, metro and railway transportation, logistics and warehousing, irrigation projects, etc. The proposal to grant 100% tax exemption to Sovereign Wealth Funds on their investments in infrastructure is expected to bring copious and long term funds into the sector. Similarly, abolition of dividend distribution tax will encourage foreign companies to also step up investments in these projects.
The idea to develop five new smart cities with states under PPP model is also a step in the right direction as it will have the potential to harness convergence of three different economic activities of upcoming economic corridors, manufacturing activities in those regions, and new age technologies and demands of aspirational classes.
Backed by a dynamic workforce, India is at the cusp of a major economic transformation and a flurry of projects are critical to not only provide gainful employment but also fulfil aspirations of a young society that wants better standards of living, with access to health, education, clean energy, water and better jobs. It is here the Budget has rightly laid stress on the need for a robust education system for creating next generation talent pool and enhancing skill sets with greater inflow of finance to attract talented teachers, innovate and build better labs. Various innovative ideas like improving employability of students in general stream, providing internship to newly graduated engineers in local urban bodies and attaching a medical college to an existing district hospital in PPP mode are noteworthy.
The budget has provided ₹22,000 crore for power and renewable sector. Interestingly there is mega push to boost generation of solar power. Schemes like helping 20 lakh farmers set up stand-alone solar pumps and enabling them to set up solar power generation capacity on their barren land and sell it to the grid will give a fillip to renewable energy in the country. Similarly, the plan to set up large solar power capacity alongside the rail tracks on railway land is also a laudable move. Along with several large renewable energy projects including solar parks, such small ticket projects by farmers will allow India’s rapid transition to an era of sustainable and clean power generation and bring down our dependence on coal based power generation.
Given that a number of our cities are battling polluted air, it is heartening to note that the budget also talks about the need to shutdown thermal power plants that are old with high carbon emission levels. The land vacated by such power projects can in fact be used to set up wind or solar energy farms. The budget has also allocated Rs 4,400 crore to encourage states to implement plans for ensuring cleaner air in cities.
While the budget did not announce any major steps to address the financial woes of the distressed power distribution utilities or DISCOMs, it set the ball rolling with the proposal to promote smart metering. If states and Union Territories replace conventional energy meters by prepaid smart meters in the next 3 years, it will significantly ease the financial burden of DISCOMs and cut their losses. At the same time, it would give consumers the freedom to choose the supplier and the price of electricity.
To sum it up, the budget has the right intent in several areas. It is now over to quick and seamless implementation to unleash the animal spirits in the economy.
Views are personal.
The author is zone president & managing director, Schneider Electric India.