Note on Reaction to Union Budget 2016-17
The Union Budget 2016-17 presented by the Honorable Finance Minister, Mr Arun Jaitley,focuses on policy and taxation reforms needed to provide impetus to the economy and reflects the government’s commitment to improve the Ease of Doing Business. Through the Union Budget, the government has taken steps to boost the agricultural and social sector for an inclusive growth. The Budget takes forward reforms initiated by the government since it came to power and seeks to create a facilitating environment for conducting business in India.
The Budget has taken a special emphasis on Tax Reforms and Dispute Resolution which should go a long way in creating a facilitating environment for conducting business in India. The announcement of the Public Utility Resolution of Disputes Bill to streamline institutional arrangements for resolution of disputes in infrastructure related to PPP and public utility contracts is a welcome move. This will allow speedy resolution of disputes.
In the Union Budget, the Finance Minister has tried to do a balancing act between fiscal consolidation and growth in the midst of global headwinds. Announced in the backdrop of the recommendations of the 7th Pay Commission and One Rank One Pension (OROP), the Union Budget, acknowledges the need to prioritise Government expenditure and focuses on nine core sectors including agriculture, social sector, infrastructure, tax reforms and fiscal discipline.
India is the world’s third-largest producer of crude steel (up from eighth in 2003) and the world’s 3rd largest consumer of finished steel. The government is looking to increase the capacity to 300 MT from the current 110 MT by 2025. The steel sector should get the much needed demand boost through the government spending in infrastructure. The Budget has significantly increased the outlay for infrastructure. Total outlay for infrastructure Rs.2,21,246 crores in 2016-17. Together with the capital expenditure of the Railways, the total outlay on roads and railways will be Rs.2,18,000 crore in 2016-17. Increased infrastructure investment will give a big boost to the India’s overall economic development. The budgetary proposals announced by the Finance Minister will help the industry meet its growth target and reach its full potential. However, the doubling of Clean Energy Cess from Rs 200 to 400 per ton would further increase the input cost for domestic producers.
In the coming days we are hopeful that the Government will take steps to progress the GST Bill including the suggestions given under CEA panel. Implementation of GST will help reduce multiple taxation and also in simplification of the tax process in India, thus bringing more investments. The Steel industry is a major contributor to India’s GDP and is also pivotal to a number of allied industries and sectors such as- Infrastructure, Automobile, Defence and Aviation etc. Therefore it is important that the steel industry be brought within the ambit of the GST and taxation of the sector be as efficient as possible.
The domestic steel industry will continue to play an important role to the Government of India’s schemes of ‘Make in India’ and ‘Smart cities’ as it is a key material supplier to the allied industries. However, the industry has been bogged down by a deluge of imports and predatory pricing over the last 18 months. The absence of a level-playing field with countries has impacted domestic producers. While recent interventions by Government of India have given some breather, long term measures to create a level playing field are required to firewall the domestic steel industry from global overcapacity and dumping.
Overall, we are happy that the Union Budget presented is focused and will help improve ease of doing business in India. We look forward to working closely with the government towards holistic development of the sector, the country and in realizing the Smart Cities and Make in India vision.