By Chanda Kochhar, ICICI Bank
The Union Budget for FY19 has taken a balanced and a responsible approach to achieving multiple objectives for the Indian economy. It combines a continued focus on infrastructure development and social sector priorities, while working within a prudent fiscal framework. The emphasis has been on social imperatives, physical infrastructure and ensuring fiscal credibility.
Within the social sector reforms, the National Health Protection Scheme, covering vulnerable populations for secondary and tertiary healthcare, is a commendable initiative. The enhanced initiatives taken for promoting education, RD and skilling are much-needed steps and will help to better harness our demographic dividend.
The holistic focus on the rural economy, encompassing both farm and nonfarm sectors, is welcome and the broadbased spectrum of measures will go a long way in boosting income levels for a large proportion of the population. The commitment to ensure that a farmer realises the minimum support price (MSP) and is not forced to sell at lower levels is a welcome step, and, along with higher MSPs, should help in raising farm incomes considerably. The focus given to non-farm activities is also important as rural activity is increasingly shifting towards allied areas such as animal husbandry and agro-based industries.
This would help to diversify the rural economy. Besides, the fact that the marginal propensity to consume is higher for the rural population compared to the urban population will help buoy overall private consumption in the economy.
The government has continued to move ahead with the execution of its vision of creating significant infrastructure assets to take India onto a higher growth path. Allocations to road and rail sectors are at an all-time high and are a testament to this commitment.
The continued emphasis on housing will expand home ownership and spur demand across related sectors. The division of the expenditure between budgetary and extra-budgetary sources will provide investment opportunities.
Measures announced in the Budget will lead to deepening of the corporate bond markets. These will help expand the supply of paper by nudging corporates towards bond markets; and expand the available funds by changing the ratings criteria for investing institutions.
The government has also proposed to accept key recommendations of the FRBM committee. There will now be a fixed road map for capping public debtto-GDP for the central government. This is a significant move as it instills even more confidence in the fiscal framework.