International developmentNarendra Modi’s Bharatiya Janata Party (BJP) became the first political party for 30 years to win an absolute majority in the Indian Parliament when it emerged victorious from last May’s general election. And on 28 February Modi gave a comprehensive account of his intentions when his Finance Minister, Arun Jaitley, delivered the BJP’s first complete budget.
Dr John C Hulsman, a senior columnist with the London financial daily CityAM, described it as “the single most positive international development of recent months – the reawakening of the Indian giant”.
$11.4bn
The amount of extra money the BJP has pledged to invest in infrastructureApart from the news that the economy is set to grow 8-8.5% in 2015-16, Hulsman welcomed a further $11.4bn in infrastructure investment, the decision to slash corporation tax from 30% to 25% over the next four years and the introduction of a harmonised goods and services tax (GST) that will replace “a confusing and diverse” series of federal and state levies.
CityAM article
Ambitious projectGautam Chikermane of Indian news website firstpost.com was equally upbeat. He identified two game-changing initiatives – one aimed at the domestic market and the other at outside investors – “that will make India a global financial hub”.
The internal reforms will create an all-new Indian Financial Code that will make a bonfire of 61 existing laws, and a sector-neutral regulator, the Financial Redressal Agency, will stamp out rampant misselling of financial services.
His second reason to be cheerful is the Government’s commitment to turn an ambitious project called Gujarat International Finance Tec-City (GIFT) into an international financial centre to rival the likes of Singapore and Dubai.
The plan is for GIFT to offer offshore banking; insurance, assurance and reinsurance; and regional financial exchanges, as well as back office functions.
Chikermane says: “Since an international financial centre… can’t just live on money, GIFT is being created as a smart city with schools, hospitals, clubs, entertainment centres and so on to attract top talent from across the world. The urban infrastructure being planned is world class.”
He adds: “India’s international financial centre will occupy the time zone that’s currently lying vacant, between Singapore to the East and Dubai to the West.”
firstpost.com piece
Barriers remainEven the habitually sceptical The Economist sounded a note of optimism about India’s budget.
Jaitley “set the scene for a bold, visionary and reforming budget of the sort that would convince investors, foreign and home-grown, that India was a country on which to place long-term bets. The budget was undoubtedly a reforming one: Mr Jaitley announced a welter of initiatives, many of them ambitious, almost all conducive to economic growth”.
It praised the decision to have a formal inflation target enshrined in statute, a pledge to keep the Indian Government’s budget deficit to 4.1% of GDP, the creation of an Indian common market via the introduction of the GST, and the pruning of tax breaks funded by the cut in corporation tax mentioned above.
But barriers to investment remain in the form of laws that govern land acquisition and the hiring of labour, it argued.
Jaitley did not address these issues in the speech – a speech which The Economist says was missing a "vision of where it [the budget] would all lead".
Summing up the speech, The Economist says: “There were plenty of strong threads in the budget, but Mr Jaitley missed a chance to twist them into a good yarn"
The Economist story
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