Mumbai // India’s federal budget has been praised by business leaders for efforts to boost growth and plans to ease the environment for foreign direct investment.
The budget for the financial year that runs from this April to March 2018 was presented yesterday by India’s finance minister, Arun Jaitley. It was particularly closely watched following the demonetisation about three months ago to curb black money flows, a move that has led to a cash crunch and prompted GDP growth forecasts to be cut.
Faizal Kottikollon, the founder and chairman of KEF Holdings, a diversified group headquartered in the UAE, described the budget as “a bold and progressive one, striking the right balance among different sectors with an eye on growth and employment”.
Infrastructure, the digital economy and affordable housing were some of the main areas of focus. India unveiled plans to spend up to 3.9 trillion rupees (Dh212.29 billion) on much- needed upgrades and development of infrastructure in the new financial year.
In a break from tradition, the railway budget was merged with the federal budget, with the government announcing plans to spend 1.3tn rupees on railways – the largest ever.
Income tax rates for individuals and companies were also reduced in a move to alleviate some of the pain that has been caused by demonetisation. Scrapping the two largest value notes in November has negatively affected consumer spending.
Anand Shah, the chief information officer of BNP Paribas Mutual Fund, said the budget managed to maintain a “focus on fiscal prudence”, despite expectations that some populist measures could be taken ahead of key state elections this year.
The budget “has put India back on the shopping list of foreign institutional investors”, said Dhiraj Relli, the managing director and chief executive of HDFC Securities.
Mr Jaitley also announced that India would scrap the Foreign Investment Promotion Board, known to be an agency with cumbersome bureaucratic procedures, in an effort to help ease the flow of FDI. He also said the government would continue to relax FDI guidelines.
Mr Kottikollon welcomed the move. “With a GDP growth rate of close to 7 per cent, India today is in a sweet spot, driving global growth, and this measure will invite more investments from round the world,” he said. “To my mind, the expected slowdown due to demonetisation will be, to a large extent, offset by foreign investments.”
Analysts said the move to scrap the board could give a boost to India’s property industry.
“This will give the real estate sector access to significantly more funding than it has today,” said Anuj Puri, the chairman and country head of JLL India. “A new FDI policy is under consideration, which promises to liberalise the FDI regime further.”
Indian markets reacted well to the budget, with the benchmark BSE Sensex gaining 1.8 per cent to close the day at 28,141.64. The rupee strengthened slightly against the US dollar to 67.57 from 67.60.
There was some uncertainty in the morning over whether the presentation of the budget would go ahead following the death of a member of parliament, which usually results in parliament being adjourned the following day.
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