If the stock markets are a barometer of the acceptability of an event and its initial reaction is euphoria, then Budget 2011 certainly seems to have met most expectations.

Announced in the backdrop of a challenging global geopolitical environment, inflationary pressures and so on, the Budget speaks about several reforms initiatives to bolster growth. It speaks about extension of the nutrient-based subsidy scheme to cover urea, speaks about a radical shift to cash in delivering kerosene and fertiliser subsidies, a manufacturing policy to increase the sector's share in the GDP from 16 to 25 per cent.

There is also the pending introduction of several Bills in the financial sector, assurances for granting banking licences and additional funds for recapitalisation of Public Sector Banks.

On the tax front, the Budget reconfirms the government's commitment to implement the Direct Taxes Code and the Goods and Services Act. As the DTC is proposed to come into effect from April 1, 2012, the changes in the direct taxes were minimal.

As far as individuals are concerned, there is an enhancement to the personal tax exemption limit and further concessions to senior citizens. For corporates, the surcharge rate has been reduced and Minimum Alternate Tax (MAT) increased.

The red herring is the extension of MAT to limited liability companies, SEZ units and SEZ developers. Further, SEZ developers will now be liable to payment of dividend distribution tax. The last two proposals are vulnerable to public criticism, as rollbacks that could shake investor confidence of a stable tax regime.

On the indirect tax front, contrary to popular expectations of a hike in tariffs, excise, customs duty and service tax have been left untouched. There has been a reduction of exemptions in the central excise rates structure and expansion in the ambit of services (specified hotels and hospitals, air travel and so on) for service tax purposes.

The Budget attempts to bridge the current deficit through a series of measures. On the infrastructure front, there is a sincere attempt to mobilise funds into the sector by enhancing FII limits for funding infra projects coupled by a lower tax withholding rate for investments. There is an extension of a year to tax concessions provided for investments in infra bonds.

On the governance front, the Budget recognises the need for a transition towards a more transparent and result oriented management system in India.

It speaks about the progress of the UID mission, various IT initiatives, measures for tackling corruption, setting up of performance monitoring and evaluation system and measures to tackle black money.

So if the Budget 2011 finely calibrates growth and fiscal consolidation, what is the worry? The answer is execution.

How long have the Companies Bill been under consideration. It is already a couple of years since DTC and GST were mooted; there are many such reform initiatives hanging fire on execution. Yes, coalition governments have their own challenges and one needs patience, but the opportunity to reach the rarefied club of double-digit GDP growth requires speedy action.

Though our demographics promise decades of sustained growth, one cannot ignore short-term bumps in the form of inflation, rising oil prices, possibility of an overall slowdown and an erratic monsoon.

In the short term we would need all the forces to converge favourably, achieving fiscal consolidation while maintaining growth momentum.

(Mr Vanvari is Executive Director, KPMG, and Mr Arinjay Jain is an Associate Director.)

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