Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Opinion / Budget 2014 aims to facilitate surge in investment
BackBack

Budget 2014 aims to facilitate surge in investment

This budget could be the springboard to a massive investment surge with the accompanying benefits of job creation and wealth dispersion

If even 25% of the massive real estate debts can be converted to REITs, the value unlocked would provide a massive fillip to the sector. Photo: Pradeep Gaur/MintPremium
If even 25% of the massive real estate debts can be converted to REITs, the value unlocked would provide a massive fillip to the sector. Photo: Pradeep Gaur/Mint

As maiden budgets go, this was expected to be a marker—an economic blueprint from a freshly minted government. It achieved more than that, though with a wry glance to its principal political constituencies.

Finance minister Arun Jaitley eschewed grandstanding but over the course of his two-hour-long speech he laid out the equivalent of an economic philosophy. Read in conjunction with the Railway budget, the Union budget was a clear articulation of the Bharatiya Janata Party’s (BJP’s) economic thinking with a well-defined to-do list comprising the following instructions to itself:

• Lay down the institutional structure.

• Get the investment cycle kick-started.

• Don’t do it yourself—just be the facilitator.

• Choose the biggest accelerators.

If addressing the revenue subsidies and making a bold pronouncement on curbing the fiscal deficit bore the stamp of good housekeeping, the nature of the proposed capital expenditure showed the government’s growth intent.

The multiplier effect of capital expenditure like the 10,000 crore venture fund for small and medium enterprises, is just the springboard an asphyxiating economy needs, but the Narendra Modi government, through its finance chief, is choosing to do it differently by following an investor’s approach rather than the dole-based one of its predecessor. Intrinsic to this is the investment ethos of a smart investor, with the government looking to provide the seed money for projects and then using the public-private participation (PPP) model to attract other funding to leverage its own contribution.

The underlying objective is to ensure that the 36% of the economy which comes from investment has a free run enabled by a lower cost of capital and productivity gains. To this end, we saw a series of minimal investment announcements (29 projects of 100 crore or so), geared to addressing specific but minute constituencies with the scope for incremental change. This could be as much the 100 crore technology development fund, as the 1,000 crore to improve rail connectivity in Northeast India or the 100 crore for organic farming in the region.

Like an angel investor’s scatter gun approach, the Modi government is seeking its force multipliers from among many such projects while at the same time pushing productivity growth through such schemes as the apprenticeship programme and the big kicker, the Goods and Services Tax (GST).

Jaitley was spot on in detecting the “exasperation of the people with the status quo" and over the two hours of a remarkably thorough speech, we saw an overarching vision that would mark out his political boss, prime minister Modi, as a latter-day Margaret Thatcher.

From the budget, it is clear that this government sees itself as more of a facilitator and enabler, whether it is in the plan for infrastructure development or the unshackling of banks by the removal of SLR (statutory liquidity ratio) and priority lending curbs on them in lending to infrastructure projects.

If that happens, there is no reason why the banks cannot develop as large infrastructure lenders. The same goes for the proposal on real estate investment trusts (REITs). If even 25% of the massive real estate debts can be converted to REITs, the value unlocked would provide a massive fillip to the sector.

Forget about Budget 2014 as a year’s worth of accounting. Viewed with the lens of a long-term projection, this budget could be the springboard to a massive investment surge with the accompanying benefits of job creation and wealth dispersion. For a $2 trillion economy, the 500 crore solar subsidy fund may seem like a piffling amount, but for a power-starved economy, the 200-odd megawatts of solar power this would generate is a critical catalyst.

There is nothing remarkable about Arun Jaitley’s first budget as finance minister for the Bharatiya Janata Party-led National Democratic Alliance government. It does, however, make you wonder what the United Progressive Alliance government had been doing these last five years.

All these ideas have been there in the system; Jaitley has just cherry-picked those he deemed fit.

The author is Executive editor, Livemint.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 10 Jul 2014, 09:54 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App