After her maiden budget speech, it would be fair to say that Finance Minister Nirmala Sitharaman has made an honest attempt at her task. But the roadmap seems stronger on intent than on real ability, at this stage
As always, the immediate aftermath of the budget has been taken up by the tax raise on the rich. However, while the rich fret, the budget has done a good job for the sustainability sector considering the limitations of time to prepare, as well as the barely nine months the minister has to get things going before the FY ends.
Right upfront, let’s talk about the idea she has put forth about setting up a stock exchange type body for social enterprises. The idea is new, innovative, and in theory, much needed. So full marks for acknowledging, and starting work. The big challenge now would be to ensure how it is executed, and how fast.
It is no secret that the existing ‘market’ for fund raising for social enterprises is too rarefied with both access and decision making usually too opaque. Enterprises at the grassroots level doing amazing work struggle to raise funding to continue the work, even as enterprises made of nothing more than talking heads continue to roll in the stuff.
This needed to change, and true to form, the Narendra Modi government has addressed it. It is even more important when one considers the impact the virtual freezing of funding through the FCRA has had on a lot of work, real, and unreal. The sooner this is implemented, the better it will be.
A second issue on which the minister has surprised has been the government’s love for EV’s. It is becoming clear that irrespective of the final date, the government increasingly sees legacy auto makers and their protests against EV’s as self serving to a high degree. And while it will necessarily have to show flexibility on some of their demands, it will do whatever it can to ensure that India makes a serious pitch to become an EV manufacturing hub.
The shift to 5% GST from 12%, the exemption of customs duties on key parts import, investment benefits for manufacturing of storage products; and of course the big surprise, the Rs 1.5 lacs income tax benefit on loans for EV’s, are altogether a massive vote of hope and confidence in the sector. No one will have any doubts anymore on its intent when it comes to EV’s.
An interesting move in this budget has been to burden pump prices of diesel and petrol with an additional Rs 1 of excise duty. While most will see the move as a way to shore up finances at a time GST has taken away a lot of the room for tinkering, the extra duty indicates something else too. That irrespective of what happens to international prices of crude, when it comes to the downside, the government is very clear that it will not allow prices to drop beyond a floor.
Right now, that floor price seems to be in the range of Rs 60 for Diesel and Rs 70 for Petrol. How it reacts to a spike in crude oil prices, we have already seen that the price ceiling is possibly as high as Rs 100 for petrol, and even Rs 80 for diesel. But this signalling also helps multiple players in the renewables and EV space see long term predictability on their own plans.
The continued support for the Sagar Mala (ports network) project, and the Jal Marg (Inland waterways) project has also demonstrated that irrespective of the environmental impact, the development argument still holds sway in the government. Hopefully, with better checks now.
The promise of additional support where required for the Jal Shakti ministry, now the fount of all decisions related to water, is also a sign of seriousness. That the money might even come from the afforestation fund is a little troubling, as it indicates poor utilisation of funds for such an important program.
An interesting side. The provision of loans worth Rs 1 lakh for a single member of women self help groups, or SHGs, when close to 2.2 million such groups exist, could be a very challenging move: as in how many avail the offer and how the money is used. The combination of this loan and availability of relevant subsidised solar, water conservation, purification and other equipment could open up a whole new market for these products, in our view.
The push for 100% coverage of households in terms of electricity and clean cooking fuel no longer looks impossible by 2024, as does the promise to make the country 100% open defecation free by October 2, 2019. That is something to look for.
The support for Zero Budget farming by taking it to more states is welcome, especially if the results coming from states like Andhra Pradesh are good. Similarly, the focus on fisheries as well as the resolve to establish 10,000 new farmer organisations is welcome to help them market their produce better. Effectively, dismantling the useless APMC in stages.
So all points taken together, this is a progressive budget that continues to build on the promises made by the government in its manifesto.