India Inc sees many positives

The BJP dismissed finance minister P. Chidambaram’s interim budget speech as being a recap of the performance of the UPA government over the past 10 years. The Bahujan Samaj Party (BSP) also echoed the main opposition’s party’s sentiments.

But business associations including the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI), the Associated Chambers of Commerce and Industry of India (Assocham) and the National Association of Software and Services Companies (Nasscom) saw many positives in the presentation.

“The vision presented in the (interim) budget is very much in line with what we believe in,” said Krish Gopalakrishnan, president, CII. “The finance minister has highlighted the importance of the manufacturing sector, which is key to reviving the economy. The performance of the manufacturing sector over the last one year has been consistently poor and is in need of intervention by the government.”

He welcomed the reduction in excise duty on sectors such as automobiles, capital goods and consumer electronics, as the move would help revive demand in these sectors. Gopalakrishnan also welcomed the fiscal figures outlined by Chidambaram. “It is clear that the government has stayed on the fiscal discipline roadmap and achieving a 4.6 per cent fiscal deficit is no small feat,” he pointed out. “The fact that the deficit has been targeted at 4.1 per cent for the next fiscal sends a strong signal and should help confidence in the economy.”

Sidharth Birla, president, FICCI, noted that “while industry expectations were limited from an interim budget formality, the emphasis laid on turning around the growth trajectory and reviving the manufacturing sector in particular are well received.”

While this was the last budget of the UPA-II government, the finance minister refrained from announcing any large populist measures, added Birla. He said industry has welcomed the initiative of a ten-point charter outlining the vision for the future of the Indian economy.

“Many of the points mentioned such as need for fiscal consolidation; importance of foreign investments for financing CAD; creating a balance between price stability and growth; deepening financial sector reforms; intensifying efforts on infrastructure development; boosting manufacturing growth with zero taxing of exports and minimum tariff protection to encourage domestic value addition; containing subsidies; having planned urbanisation and pushing skill development have been highlighted by FICCI,” he said. “While many of these points are aspirational, these are all achievable through concerted effort and a coordinated approach between the centre and the states.”

Birla noted that the financial markets also received well deserved attention with announcements pertaining to revamping of the ADR / GDR scheme; liberalising the rupee-denominated corporate debt market; deepening and strengthening the currency derivatives market; creating one record for all financial assets of individuals; and enabling smoother clearing and settlement for international investors for investing in Indian bonds. “These measures will help in further broadening of the Indian financial market and efficient availability and utilisation of risk capital,” added Birla.

Rana Kapoor, president, Assocham, said despite being low on expectations in an election year, Chidambaram’s interim budget came as a pleasant surprise at least partly to the manufacturing sector which has been bleeding. “The excise duty cut on automobiles and capital goods will provide a much-needed relief to these sectors,” he said

He complimented Chidambaram for leaving the government treasury in sound shape and with the result that the overall macro picture of the Indian economy today looks far better than it was about eight months back.

“The external sector today is far more stable with exports picking up and the current account deficit capped at $45 billion, a little less than half the worrisome level of $88 billion in 2012-13,” said Kapoor. “The fiscal deficit has also been contained at 4.6 per cent, though it has been achieved by a big cut in the plan expenditure.”

A Nasscom spokesperson said that from the perspective of the IT-BPM sector, the interim budget helped to communicate the key messages of fiscal consolidation, focus on tax reforms, inclusive growth and thrust of skill development.

“While we appreciate the government’s focus on reviving manufacturing, there needs to be continued thrust on promoting the services sector,” he said. “We hope the final budget will acknowledge the contribution of the technology driven IT sector and make adequate provisions for support of the sector given the large innovation driven SME constituents, and its ability to create jobs across demographics.”

—nithin@khaleejtimes.com