The budget gives a mix of positive and negative elements.





  • Importance to infrastructure: companies are allowed to subscribe External commercial borrowings or simply loans from overseas to finance their projects. Another major measure is the decision to allow tax free bonds worth Rs 60000 crores for the sector. The tax free bonds is the best step to mobilize funds for the sector. The previous tax free bonds worth Rs 10000 crores was a mega hit.
  • On the subsidy front, the allocation of Rs 43000 crores for fuel subsidy is nearly realistic figure compared to the previous year where the allocation was just 23000 cores whereas the actual subsidy bill went up to Rs 73000 crores as per the revised estimate. Besides, the government’s estimation of the subsidy bill by calculating the crude price at $115 per barrel is also realistic to the current prices.
  • Introduction of Rajiv Gandhi Equity Saving Scheme though good, is half hearted. This is because the tax concession allowed for Rs 50000, under the scheme is just 50%. For the retailer group, this incentive is meager.
  • Roll back of fiscal stimulus programme and raising of excise duties and service taxes will ensure more revenue to the government and thus is a bold step.
  • The Financial Holding Company model for PSB bank capitalization is a very good idea, but needs more clarity on the topic.
  • The disivestment target of Rs 30000 crores is realistic. During the current year, though the government has targeted disinvestment at Rs 40000 crore, the realized amount was around Rs 15000 crores.

The government is able to ensure fiscal health by targeting a low fiscal deficit of 5.1% of GDP, which is a credible figure in a financially difficult year.



  • Setback for reforms: the government has postponed the critical reform package on three subsidies. The subsidy reduction plan has been postponed. The government has failed to take a firm decision on fuel subsidy especially on diesel.
  • There is no precise plan in the budget for the much discussed national manufacturing policy. The policy has been a core development strategy for the country. The absence of a follow up for the policy is a weak element of the budget.
  • Excess reliance on indirect taxes like excise duties may add to inflationary pressure.
  • Higher education has been neglected in the budget: the government has chalked out establishment of new IITs, new IIMs, IISERs etc during the last five years. But such programmes are absent in the new budget. Absence of a higher allocation for higher education is a big set back at a time when the country is trying the reap the benefits of demographic dividend.
  • Financial Holding Company route for PSBs proposed in the budget is unclear.
  • Legislative reforms including that of the Microfinance Bill may face big delays and speed on the already set Financial Sector Legislative Reforms Commission is slow.

Surprising element of the budget: defence expenditure is nearly 2 lakh crores.

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