I recently shared my views on the Budget of 2010 presented by our Finance Minister, Mr. Pranab Mukherjee with one of the business newspapers. I thought of sharing my views with you as well.
26th Feb 2010 will be remembered as one of those days when a progressive budget was outlined for a resurgent Indian economy - A populist budget that struck a chord with the 'Aam Adami' (Common Man) by recalibrating income tax slabs while maintaining a strong focus on the industry especially infrastructure, a budget that aimed at propelling India to a 9% growth rate from the current levels of 7.2%. This budget has set the foundation for a strong economic performance without losing sight of the key issues that need to be tackled, like the fiscal deficit. The finance minister plans to bring it down to 4.1% of GDP by 2012-13 setting a clear roadmap on fiscal consolidation… A tough challenge, but doable.
The proof of the pudding was in the positive reaction the markets (BSE) had to the budget. It managed to reach an intraday high of 16669 some 415 points over the previous day's close. A clear thumbs up!
There we a few things that clearly stood out for me -
- Revised Income Tax Slabs - It's all good news for the salaried class. Just out of a tough recession, the finance minister has decided to put more money into the hands of the middle class. People can choose to spend or invest the money; in either case it's going to benefit the economy. This is in line with the implementation of the Direct Tax that will come in next year.
- Focus on Green and Sustainable Energy - It was good to note the waiver on solar panels and geo-thermal energy equipment, plus the setting up of the Clean Energy Fund. The aim is to generate 20K MW of solar power by 2022, this is good news for the renewable energy sector. And with the kitty of the New and Renewable Energy Ministry being increased there will also be additional focus on wind and hydro power. All bright signs I say! But the effort by people and companies in making the planet greener has to continue.
Wipro has always strived to be Green. We have successfully reduced our energy consumption by 35 % over the last 5 years by leveraging Green technologies and processes. Two of our campuses are LEED rated and we have 7 employee chapters with over 5000 volunteers for eco initiatives.
Our PC division has a comprehensive take back recycling program which customers have appreciated. In 2009, Wipro received the No. 1 Greenpeace ranking in India and is among the Top 5 Global Green Brands in the World.
- Phased approach in rolling back the fiscal stimulus - Industrial turnaround is still at early stages and investments are still not at its peak; a sudden withdrawal of stimulus would have had a regressive effect on demand - a good move indeed. The Government will continuously need to watch recovery closely while sequencing stimulus rollback - a fine balancing act that promises to challenge Mr. Mukherjee.
While there is general cheer in the air, we still need to take a long and hard look at improving the industrial growth rates. There is focus on infrastructure that this budget has brought in to quickly bridge the infrastructure gap. An independent research puts India's infrastructure investment requirement at $500 Billion by 2012. With an allocation of 46% of plan outlay to infrastructure in this budget, the finance minister has made significant investment in the future of India.
This substantial spending on roads, power and renewable energy will certainly have a positive spin-off effect on all other sectors of the economy, boosting demand and improving the quality of life.
Closer to home, the setting up of the "Technology Advisory Group" brings in focus the IT and e-Governance initiatives of Government, creating a positive impact on the industry. The allocation of Rs. 1900 Crores for UID project and leveraging technology for better efficiency in tax administration shows Government's resolve towards adoption of IT and making it another important lever for employment generation.
The budget has also continued the strong focus on education to drive inclusive growth for the nation. With services accounting for larger and larger part of the GDP of our country, the 15% increase in the allocation for education will help in the creation of a more skilled workforce and improve employability. In addition, the focus on higher education is also well received. The fact that the $50 Billion IT industry requires a strong pool of well-trained employees in order to grow cannot be over emphasized. Increasing investments in this area would help in job creation especially given the strong multiplier of direct to indirect job creation in IT industry.
While the budget seems to have been received positively, the government still has to tackle the issue of the rise in food prices, petrol and diesel.
The budget speech has ended, but the fine print is still being pondered over. As always there will be some changes, but overall I think that this has been a great budget and that has laid the foundation to further growth.