The very visionary chairman and MD, founder of Bharat Forge, Baba Kalyani, who really defines India's indigenous defense sector. He's done so much good work there. Mr. Kalyani, I'm glad we pulled you out on a Sunday afternoon and I'm thankful for your time. It's very kind of you to be here. A lot of people wait for what you say. Rajiv, likewise, thank you very much for joining us. Before I go to Mr. Kalyani, may I ask Rajiv to give me, as president of CII, a broad review, broad brushstroke reaction first to this budget as expansively as you would like to, and then I'll go to Mr. Kalyani next. Rajiv.
Yeah. So Arnab, overall very positive. If I start at the building blocks level, a continuity clearly seen from the earlier budgets, a strong focus on macroeconomic discipline, lot of focus on manufacturing across sectors. So if you look at the... I'm getting an echo back. So a lot of focus on manufacturing across, you know, and they've identified clearly seven sectors that they want to focus on. So whether it is biopharma, semiconductors, especially a lot for electronics manufacturing and also for labor-intensive sectors. On infrastructure also, if you actually see the amount of capex that they've allocated plus the grants-in-aid given to state governments, the increase is almost 20% as compared to what realistically we are going to spend. What the RE is versus the actual growth is almost 20%, both center capex plus state capex if you add that. So I think that's very positive. The focus on MSME, especially both on the credit side and creating the growth fund, I think that's been very positive. On the services sector, whether it is tourism, whether it is education, on the IT services side, I think the safe harbor rule for global capability centers will be very positive. Data centers, obviously, it's... I mean, I don't think anyone expected that they'll give a 22-year kind of tax relief. On export of services also, very clear on the transfer pricing there, and then the benefits that they provided, the customs duty rationalization, whether it's for MROs, whether it's for nuclear power, whether in some areas of electronics manufacturing. So overall, I would say a lot of focus on infrastructure, a lot of focus on manufacturing, and also on the services side, including things like gaming and others which historically, or visual mediums historically, we haven't seen such a comprehensive suite. So I would say very positive. And also the numbers that they've assumed in terms of tax revenue growth, expenditure growth and others are reasonably conservative. So last year, I think the numbers were not achieved, whether it was tax growth or overall expenditure, but they were smart enough to maintain the fiscal deficit very sharp. And I think hopefully this year also we will see the macroeconomic discipline that the government has continued in the past that being carried through. In fact, I would call this NDD budget: nuclear, data, and defense. I would say the three clear areas of focus I find the government has identified. Nuclear, which is why basic customs duty for nuclear power projects, all the goods needed, exempted till 2035. Right, they've set in motion... so what the government is saying here is that, look, here we are going to be election agnostic, we must have a policy regardless of who comes to power, India must move in a certain direction.
On data, Rajiv, I agree with you because this tax holiday till 2047 is historic. Basically, Government of India is saying, you want to make us data sovereign, we will help you. You want to make us dependent on data, we will not help you. Now, I want to move to defense. Mr. Baba Kalyani, the government has allocated 7.85 lakh crore to the defense sector in the Union budget. That's up from 6.81. That is quite significant, somewhere between 15 and 20%. What is the signal? And is there something that we need to look at beyond just the number in terms of the fine print as well that's likely to follow?
I think, you know, Arnab, first of all, I have to congratulate the finance minister, the honorable prime minister for the continuity and predictability in their reform process and, you know, the whole 2047 landscape that we are looking at. Now if you look at the defense budget, yeah, it's almost 18 to 20% increase in the defense expenditure. We have one new element now in the defense expenditure which is called emergency procurement. It was there last year but it has become much larger now. And hopefully it will continue into something called a fast-track procurement process because they want to reduce the procurement time cycle for defense procurement. And that's the reason why you see this whole increase that you are seeing in defense expenditure. Even the capital expenditure has been increased by almost 25%, by 2.35 lakh crores. And you know, I think we are, whoever is in the defense industry, is very thrilled with this, that whole continued push which was, and no unnecessary surprises that came in the budget. So we are very grateful to madam finance minister who has delivered the continuity and delivered growth in this area.
Mr. Kalyani has also had... Abhishek, this is very important here that Mr. Kalyani had led a committee, if I'm not mistaken, which was the Baba Kalyani committee, which advocated way back in 2018... in 20... way back, that's, you know, way back in 2018, this is Modi government one, it said that, you know, move from an export-led model, use available idle capacity. Maybe he can tell us a little bit more on that because this budget should make you a very happy man, Mr. Kalyani, because this budget has advocated this intent and you can perhaps tell us how what you had proposed in 2018 is getting implemented now because idle capacity is bad. Idle capacity is just a waste and underutilization of capacity is the worst thing that we can do in today's time. Mr. Kalyani, can you tell us how this budget addresses what you had thought out in 2018?
Well, I'm very happy to read this in the budget document, the SEZ rules on utilizing excess capacity in SEZ export units. This was a committee set up by Mr. Prabhu when he was the commerce minister in 2018, and I headed the committee and there were several other people including a commerce secretary at that time. And we had said that what is the point in having, you know, land, facilities and all this available in an SEZ if you can't use it for productive purposes. And there is no difference nowadays between SEZs and, you know, the general manufacturing because there are no specific advantages that were there at that time specifically for SEZ. But yeah, it took unfortunately eight years to get this going. But I'm glad that at least they made a start. I hope the rules are not very cumbersome in this. I don't know the details of the rules and caveats that they have put. I think this is movement in the right direction. You're right. India cannot afford to have anything lying idle. Any capacities lying idle. We need to improve our capacity utilization for every area of our activity, industrial, business, commerce, and this is one of the things that should help people work. I'm not in this activity so I have nothing to do with this.
You had a good role in that. Next question is very much for... Yeah. Let's take the next question for Rajiv from Abhishek please. Abhishek.
My question is, Mr. Memani, you know, you mentioned about the customs duty rationalization aspect. I mean, is it, from the political messaging point of view, do you see a measure of confidence in the manner in which the finance minister has really opened up imports so that ultimately manufacturing is benefited in the country?
