Budget 2010 - need for measures to spur growth

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Bikky Khosla | 16 Feb, 2010
A couple of days from now, on February 26, the Budget is slated to be announced by our Finance Minister, wherein he will have to come up with announcements that can spur growth as the economy slowly shows signs of looking up after a couple of years of slump.

Apart from the socio-economic obligations the Finance Ministry has to consider, I have my eyes fixed on the MSME and export sector which will need the government's support in the days to come.

For instance, the MSME sector, which is still fighting hard for its survival owing to global recession and subsequent slump in demand for its products, will require continued support from the government.

I think the key areas which the Finance Minister can focus on could be to reduce the overall tax burden of the sector and measures to stimulate manufacture and encourage research and development. Incentives including provisions for tax benefits, setting up of R&D centres to nurture entrepreneurship will be certain areas which the Budget can touch.

Measures to encourage banks and the Non Banking Financing Companies (NBFCs) to lend more to the MSME sector, a conducive environment to encourage greater public-private participation, reforms in labour laws and measures for a better infrastructure must also be looked into. In addition, the Budget can go for an extension of the stimulus packages which are specific to MSMEs beyond the end of this fiscal.

On the exports front, I feel the forthcoming Budget is likely to continue with most of the fiscal incentives extended for various segments of export sector. If the Finance Minister thinks, on the contrary, that in the face of positive growth in export there was a case building up to withdraw the fiscal benefits, he should consider the fact that there is no strong recovery in demand cycle in the global economy, on which India's export growth depends.

The 2 percent interest subsidy currently being given to exporters on rupee export credit is set to come to an end on March 31. It should be extended for a couple of more months to enable exporters to get loans two percentage points cheaper than the Prime Lending Rate - a requirement which the Unit of Internal Assessment (UIA) is also understood to have strongly recommended.

Come February 26, and we will know whether weâll get something considerable or have to be content with whatever comes our way.