Positive signals for business

There are several features of Finance Minister Arun Jaitley’s first full-year Budget presented in Parliament on Saturday that are notable, such as the effort to widen the social security and pension net, the plan to severely penalise those holding illegal foreign accounts and assets, and the proposals to monetise idle gold holdings in the country. Yet, what stands out the most is the structural shift in the government’s attitude and approach to the business and corporate sector. This is evident from proposals such as the cut in corporate tax by a significant 5 percentage points, putting off the implementation of General Anti-Avoidance Rule (GAAR) by two more years, a sharp increase in allocation to infrastructure, a proposed Bankruptcy Code, an electronic billdiscounting scheme to help the smallest of businesses to tide over cash flow problems, and even a new law to handle disputes involving public contracts. Not since P. Chidambaram’s ‘dream budget’ of 1997, which slashed corporate tax rates and taxes on royalties among other things, have we seen such a business-friendly budget. Successive governments and Finance Ministers have considered business and industry as a sector that needed to be kept on a tight leash using the instrument of taxation. In that sense, the biggest reform measure that Mr. Jaitley has unleashed lies not in any of the budget proposals but in the changed mindset towards business — the recognition that it is a major stakeholder in the economy and that its growth needs to be fostered.

So, what explains this change? The obvious answer is that the BJP has always been known to be pro-business, especially Prime Minister Narendra Modi. So a business-friendly budget is nothing surprising. But that would only be a broad explanation of the change. The more immediate explanation, though, is that the Budget had to support the Make in India theme of the Prime Minister, and what better way to attract capital and investors than by reducing taxes and easing means to do business in India. The Budget goes a long way in supporting the pet theme of Mr. Modi, whose imprint is visible in other proposals too. With an estimated 12 to 14 million people joining the workforce every year, the importance of increasing jobs, especially in manufacturing, cannot be overemphasised. It does not matter whether Make in India is aimed at exports or at the domestic market; the bottom line is investment and jobs. The Budget is the reiteration of the Modi Government’s conscious shift towards supporting industry and business. Mr. Jaitley had said earlier the Budget is but one day in a year and reforms are possible in the remaining 364 days as well. If that is any indication, then more reforms lie ahead for business and industry.

Keywords: Finance Minister Arun Jaitley, Union Budget 2015