The Hindu Business Line : Interim Budget — Feel-good factor is undercurrent

THE Interim Budget aimed at increasing "Gross National Contentment" provides enough fuel to keep the feel-good factor going. Enough emphasis was laid on the need to spend on and improve health (hospitals), education (colleges), poverty eradication, creating jobs and boosting agricultural growth and infrastructure.

All of these are thoughts in the right direction. Implementation, however, is key.

Overall, given the restrictive framework of a vote on account there were announcements for everyone in key constituents - farmers, small businessmen, individuals, industrialists alike. Some were measures; some were promises. But the theme of a "strong resurgent India" was underlying almost every announcement.

Robust economic growth, strong currency reserves, low interest rates, resurgent capital markets was the performance report card presented and this was the base for further measures.

Agriculture received a lot of attention in terms of measures for agricultural services, tea, sugar, cattle& animal husbandry. A lot of these were aimed at easier access to funds, reducing cost of finance and providing for rehabilitation packages in certain industries. Given the population percentage that is still dependant on agriculture, the moves are in the right direction provided that they are implemented.

Small and medium enterprises also got a promise to increase ease of access and flow of finance to them.

The halving of stamp duty for Central Government transactions is welcome. Immediately financial instruments in the banking and finance sectors will benefit. Hopefully this will be followed by the States so as to reduce transaction costs in several key areas.

The extension of fiscal concessions to the power sector to 2012 and extension of benefits of long-term capital gains tax for investment in equity shares for 3 years are welcome steps.

Infrastructure development continued to receive focus - water scarcity management, convention centres, development finance etc. Here again implementation is key.

The decision on tonnage tax for Indian shipping companies in line with international practices is very welcome.

The decision to merge 50 per cent of Central Government employees DA with basic allowance is perhaps retrograde and could have far reaching implications on government finances in that - State Governments are likely to follow and the increase in government's liability on account of provident fund and pension provisions is likely to impact fiscal health

The news of fiscal consolidation and revised reduced estimates of lower fiscal deficit of 4.8 per cent (of GDP) for this year as against the targeted 5.6 per cent is welcome.

But this needs to be examined for fine print.

From the figures announced this seems to have been achieved through a combination of lower expenditure and higher receipts on account of tax collections and disinvestment proceeds.

(The author is Group Head, Corporate & Institutional Banking, Kotak Mahindra Bank)