In the run-up to the Budget 2016/17, the FM got advice from many quarters that he should relax the fiscal target "just this one year". But by sticking to the fiscal glide path of 3.5 per cent, he has not only reaffirmed his commitment to fiscal discipline, but more importantly, has set the stage for the RBI to reduce rates.
Second, Budget 2016/17 like in the past years, the focus is on infrastructure - power and roads. Investment of Rs 2,18,000 crore in roads and rail infrastructure is a great direction to set, which includes allocation of Rs 55,000 crore for urban roads and highways, Rs 27,000 crore for rural roads, and Rs 15,000 crore from state budgets. This will have a multiplier effect for demand for cement, electricity, cables and so on.
HIGHLIGHTS:Union Budget 2016
Third, I am happy the budget has accepted the proposition that small entrepreneurs can pay tax at lower rate of 29 per cent, which is effectively moving corporate taxation to the progressive structure. To provide benefits to small entrepreneurs has a triple benefit: it is more equitable, they will become more tax compliant, and they become eligible for loans from the banking system.
Finally, a key move is to tax new manufacturing companies at 25 per cent which reiterates that we will move towards lower corporate tax rates of 25 per cent one day after abolishing exemptions, which will make us more internationally competitive. Overall, the budget 2017 touches all the right buttons, and equally, didn't touch any wrong or sensitive ones.