Reuters blog archive
By Andy Mukherjee
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The new Indian government’s maiden budget fell short of the hype. But Narendra Modi’s administration earmarked substantial sums for new infrastructure, which should revitalise growth.
The July 10 budget was the most important financial test for Modi since his Bharatiya Janata Party won power with a sweeping mandate in May. Yet it lacked the far-reaching reforms many economists and investors wanted. Finance Minister Arun Jaitley gave no hard deadline for introducing a federal sales tax - a long-delayed reform which would stimulate growth and allow manufacturers to sell more easily across India’s 29 states. And rather than tackle ballooning subsidies and handouts, Jaitley pushed the problem to a new commission.
Still, he did attend to some crucial tasks. Insurance and defence-related manufacturing will be opened to greater foreign participation. And the tax code will no longer be tweaked retrospectively. This removes a major uncertainty for investors, who were spooked by the previous government using the manoeuvre to put Vodafone on the hook for about $2 billion.