The infrastructure sector clearly remains in focus. Road sector impetus continues with added focus now on waterways. Aviation sector was touched upon with selective higher FDI, domestic aviation financing facilitation, focus on MRO together with divestment of Air India. Investment in Railways along with Public/Private participation are bold initiatives but the success lies in getting consensus and execution. Increasing liquidity is clearly an area of immediate focus. Larger entitlement of loans to MSME, portfolio purchase from NBFC by banks backed by first loss guarantee of 10% by government will help provide relief to the MSME sector that has been impacted by ILFS default.
Rs 70,000 cr of PSU Bank Recapitalization is timely, given that the NPA cycle has bottomed out. Given the Investment cycle is showing green shoots and investments are increasing per Economic Survey, this recapitalization is timely. Further, RBI will enhance governance both in the NBFC and PSU Banks will be a positive to develop healthy credit culture for the country.
Deepening the domestic bond market has been a long-awaited requirement of the financial sector. This budget focuses on number of initiatives in this area that should be beneficial for capital raising in an efficient manner.
The budget continues focus on quality of living for all. The target of affordable housing of 2 crore units by 2022 and electricity, drinking water and Gas connection for all will significantly impact quality of life. This will also act as a stimulant for employment, and the attendant sectors of cement, steel, consumer durables, etc. The model rental contract will facilitate entry of corporates in the housing rental market that will further boost the housing sector.
India is a young nation and demographic dividends can only be achieved when we invest in youth. The budget did talk about a new education policy, massive open online education initiative and regulatory reforms for higher education.
However, investments in primary and secondary education does not feature. Also, while there is a mention of Standup India initiative continuing, Skill India initiative does not get any mention in the budget. Our biggest challenge of a million job seekers entering the job market every month require skilling to compete in the current economic environment but are woefully short of life skills. This is an area that could have done with more attention. In the last financial year, there was a massive scheme to insure the under privileged part of the society for hospitalization benefits up to Rs 5 lakh per family targeting 10 crore families. It was expected that this budget would supplement this initiative with increased investment in the health sector. Sadly, the health sector was completely missing in the budget announcement.
The initiative of floating global tenders for mega manufacturing companies in selected sectors with substantial tax benefits is an interesting development. Most emerging market countries are rolling out red carpet for such investors and our offering has to be really competitive if we expect to achieve significant results.
Similarly, the incentives on electric vehicles including lower GST plus Rs 10,000cr for next three years earmarked for faster adoption of electric vehicle is a step in the right direction. Continuing on the investment theme, the Economic Survey quotes the Chinese model for development. Large part of Chinese development was financed by overseas Chinese investors. By treating NRI as preferential investors to other foreign investors, India can benefit in a similar way that China has benefited.
In closing, the FM started with the vision of India entering the virtuous cycle of saving, investments and exports and said that the budget was a step in that direction. While a beginning has been made with the intent, clearly effectiveness will lie in the execution.