Sentiments are positive; industry is ready to get a move on, after two-three years of low/de-growth and the developed world is waiting to invest having very few other options.
The macro scenario also looks very supportive, with the decline in growth having bottomed out and GDP now over 5 per cent (or even higher if the revised basis is taken), the current account deficit having narrowed to 1 per cent, inflation trending downwards, oil prices at a historical low and the rupee stable.
The Reserve Bank of India made an out-of-turn reduction in interest rates by 25 basis points in January. Though it held on to rates during the formal policy announcement in early February, the RBI Governor seemed to indicate that further easing of rates would be contingent upon whether the Budget demonstrates its intent on fiscal consolidation and containment of inflation. That is a fair expectation.
There are, however, risks and concerns. Global growth is suspect with China being the biggest risk as its growth rate has already dropped from 9 per cent to 7 per cent now and is forecast to go even lower to 4-5 per cent.
The euro zone continues to be a question mark for the foreseeable future. Our own exports growth is slowing, credit offtake is subdued, the IIP (index of industrial production) is volatile and NPAs of banks are a big concern.
Nevertheless, it is for India to take the necessary actions emanating out of a vision that is best articulated in the annual national Budget document rather than the Budget being a mere accounting statement.
The expectations from the Budget are many. Among them:
1. Continued fiscal consolidation while yet creating fiscal space for enhanced public spending.
2. Promotion of growth that is investment-led rather than consumption-driven.
3. Ensuring that inflation remains within the band that is both politically and economically acceptable.
4. Growth must generate employment and employability for which education spends must be enhanced and creation of skills needs to be incentivised.
5. Business must be easy to do and further rules and regulations should be made based on mutual trust between the government, the private sector and the citizen.
6. A progressive, predictable and consistent tax regime is a pre-requisite.
To kick-start investment-led growth, it is imperative that projects of national importance that are already cleared (shovel ready) or which can be fast tracked - such as the DMIC (Delhi Mumbai Industrial Corridor) and DFC (Dedicated Freight Corridor) - are monitored, progress publicly announced and accountability of the department and individuals concerned clearly specified.
These projects will have a multiplier impact on the economy by way of generating demand for steel, cement etc., while creating millions of direct and indirect jobs across sectors. For the initial two years, it will be public spending - for which fiscal space mentioned above will have to be created - that will be required to fund these projects, to give the economy some growth momentum, before public-private partnership projects step in and take over.
The Budget must target to restore GDP growth of 7-8 per cent by 2017/18 from where the next leap onto double-digit growth can be contemplated.
Vipin Sondhi is MD & CEO, JCB India.