Infra thrust will result in long-term benefit
The budget 2017-18 is partially growth oriented and is presented during the transition phase of an ongoing major tax reform “Introduction of GST”. The allocation of funds for infrastructure development will result into long term benefit for the economy. An overall allocation of Rs. 241,387 crores for the transportation sector is quite significant with specific novel idea of 2000 kilometers of coastal road connectivity. Some other ideas like Metro Rail Act, amendment in the Airport Authority of India Act for tier II cities airport upgradation and specific program on multi-modal logistics parks will support overall economic development.
The reduction of corporate income tax to 25 % for companies with turnover up to Rs. 50 Crores is supporting the SME companies though the expectation set was much higher. The efforts made for improved tax administration, faster tax assessments and removal of FIPB approvals support the objective of ease of doing business.
The Government has taken a bold move of demonetization about three months back to curb the parallel economy but continuity of that approach was not visible in the budget. There was a need to take specific steps to further reduce cash transaction across all business models. The deficit which is pegged at 3.2 % as per the budget is quite optimistic in our view and unlikely to be achieved unless the GDP growth crosses 7.5 %.
Overall, the budget presented during transition phase of tax reforms is giving some time to the government to plan and bring positive development for the Indian Economy.