Check out what economists, analysts, corporate honchos and market mavens have to say about the Union Budget
It is a very good Budget in the sense that for the first time I get the feeling that the Finance Minister is listening to the people's suggestions and the problems they're facing. One of the biggest points is that an investment management facility has been allowed--to bring investment management from Hong Kong and Singapore to India. And we will finally have an international finance centre, the GIFT City in Ahmedabad. This is a huge development.
Apart from this, there is the promise of corporate tax deduction from 30% to 25%. This is a five-year promise, and it is not yet known how much will be cut this year. But a five-year possibility is also a huge thing. The SARFAESI (The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act has been extended to all NBFCs--this gives them a lot of teeth. And overall tax mobilisation is limited. So the burden is little and there is an allround push for growth. I thought the infra-spend push was not big enough, but we need to see the final points.
Swaminathan Aiyar:
It is a first-class Budget. I have a few reservations, but nevertheless this is a Budget for growth. Even more important, it is a Budget for global competitiveness to put India right out there. I am very happy to see that there is a push to cut red tape to increase ease of doing business. At the same time, I am glad to see that a considerable amount shows that this is not a Budget just for fat-cat corporates. There is a huge amount for every section of society, including the poor.
Just some caveats--I find that the service tax is up to 14% and excise 12.5%. I thought we were going for a unified GST, so I do not understand why those two figures have gone apart. I want to add that on fiscal deficit, I am disappointed he did not stick to his word. Having made the commitment last time, he should have done it.
I am further disappointed that the revenue deficit is as high as 2.8%, which means the quality of the fiscal is not as good as it should be. Finally, all this data presumes a growth of 8-8.5%, about which there have been questions. If you have a failure at this end, there will be other problems.But, taken on face value, I would say he has done a good job overall.
ET NOW:
Do you think the biggest hurrah is purely on the corporate tax side, because if corporate tax rates go down, EPS will automatically move up?
Raamdeo Agrawal:
Yes, eventually it will move up. The clarity is not there about current years. Service tax going up from 12% to 14% is real. One has to see what is the total impact of the infra-growth push, infra-spend push, and of course the additional Rs 70-80 thousand crore. But apart from this, 3%, 4%, 5% of GDP coming from extra budget resource and such does not seem to be coming through. So there is some kind of disappointment, but we need to see the final footprints.
ET NOW:
Plenty of things as far as the financial sector is concerned. The FII, FDI, the FMC merger--fair amount of changes that will allow capital flow and the gold monetisation scheme. Give us your overall sense of the budget.
Punita Kumar Sinha:
It was a very pleasant surprise that he has balanced the needs of all segments of the economy, rather than the super rich--who are the only ones to be impacted a bit negatively. The corporate sector, the rural sector, the thrust on education, health, senior citizens, youth--there are just so many segments of the economy that are going to benefit. Therefore, I would call this a growth-oriented budget and long-term the trend is to simplify the tax structure, which will make it easier to do business in India. It is going to help domestic investors and foreign investors.
ET NOW:
Like everybody has been saying, it is a balanced budget. He (Jaitley) has spoken to corporate India, he has also taken care of the middle class. There is a plenty of push as far as social-sector schemes are concerned. Do you believe it is a balanced budget?
Mythili Bhusnurmath:
I differ a little bit from Swami. It is definitely a pro-growth Budget, but through the corporate route. So, it is pro-business and pro-overseas investors. I am not sure that much has been really done for the poor. The hope really is that the public investment that the government is driving will help the lower classes.But there are many things-(such as) making EPF optional--that goes against the interest of the poor. Despite the list of schemes for the poor, they have really not been taken care off as much as a government that claims to be doing so should.
ET NOW:
Swami has given a thumbs-up to the Budget. Markets believe it is a good Budget. What is your assessment? Do you believe it is a progrowth Budget?
Chanda Kochhar:
Yes, it is actually a very good Budget because there is a fine balance between growth, inclusiveness and fiscal discipline.So, it is definitely pro-growth and, at the same time, it takes into account fiscal prudence as well as inclusiveness. A very important thing to say is that let us kickstart investment through the public sector units that is a very very good beginning and a very pragmatic way of looking at it. Then, of course, increasing the devolution towards the States but, over and above that, a lot of enabling things like the entire plug and play model. The entire relook at the PPP model and of course the dispute resolution and so on, the stage has been set for a much larger growth in infrastructure.
ET NOW:
What is the most defining part of this year's Budget and has the Budget done enough to kick start the stalled growth? Manish Chokhani:
Well, if you think of the Budget as a continuum and how this government has been redesigning the whole architecture of India, we are moving away from a command and control society to something where you are putting power back into the hand of the average citizen and the States. So, if you think of the way they have gone about it, they have already done the Jan Dhan Yojna and the direct benefits transfer which creates power back into the hands of the citizen rather than someone subsidising you and then you are going out and buying goods at a subsided price. You are now pro-choice. Similarly, you have devolved power back from the Centre to the States. So, they can decide how they want to go ahead. So, what were the big things one was looking for in this Budget was, directionally, where is this country going. So, you are in a way overturning the whole architecture of India away from the sort of Soviet or British imperialistic system, which we used to have, towards a more participative kind of Republican or Conservative society, which is directionally the right way to go. They have adhered to the path of fiscal prudence. They are giving more tax benefits a way to citizens as well as corporate sector. They are investing more into infrastructure. So, while the headline numbers may not look like, they have changed, the proof of the pudding is in the fact that you are shifting from 80% revenue and 20% capex to incrementally going in the other direction where over the next three or four years you will end up doing 80% capex, 20% revenue and in some sense rebuild the whole country. Also, putting this social security net across various strata of society and also providing means for people to, like I said, exercise their own choice gives you a completely new architecture and a fillip to growth. So, we are tremendously excited about it.
ET NOW:
The consensus view is that this is a growth budget. Are you okay with the fact that they have slipped on the fisc; they have allowed themselves a little bit more leeway to meet fiscal deficit targets. Is that okay with you?
Sunil Kant Munjal:
Actually, we had recommended this. We said considering that you need to increase public expenditure, current position allows you some headroom with lower oil prices and lower inflation but may not be enough for the amount that you need to infuse because for the private sector investment to come in, he is taking longer than we had expected. The consumption has not picked up as quickly as we had expected.So, there was a need for public expenditure to come in. So, we are okay with this. Overall, he has done something interesting. It is like a workman's budget. He had touched many many small areas but at the same time he has made a few very dramatic changes things like introducing the bankruptcy law, things like overall looking at the restructuring of the public sector banks itself. I am not sure how many of you noticed. It slipped in very quietly but this is a transition creating independent public sector banks which would give them much more freedom to operate. So, there are two or three on the financial sector system, there are some pretty interesting recommendations there simplification of taking wealth tax away but not losing the revenue, he is adding that 2% to income tax, etc. But overall, it is a well designed budget especially considering where we are right now and where we need to get to.
ET NOW:
FM has set up a new infra fund. He is talking about additional `70,000 crore being spent; he is talking about new bonds; he has spoken about rebalancing the PPP model. It was also announced in the previous Budget, the 3P India.Nothing really took off there.
GV Sanjay Reddy:
I am very optimistic because there are many things that he spoke about in infrastructure. I tried to count, he used the word more than 30 times. But, the most important thing is, the focus is given, the maximum focus, on infrastructure. A simple thing like even talking about PPP, the recognition that government has to take the maximum amount of risk, the rebalancing of risk is a critical recognition that needs to be done. Obviously, that cannot be done through a budget. It has to be done through a more detailed programme over the rest of the year. The amount of investment that they are talking about, even the fiscal deficit, I am perfectly fine with making it instead of two years, making it a three-year target but if it goes into the right sectors, the increase in expenditure. You know even a simple thing like fund managers who just stay away from India, these are all small things but they make a big impact especially for foreign investment.
ET NOW:
Corporate tax cut is something that India Inc is going to welcome the road map of a cut and he is going to withdraw some exemptions as well.Is that a welcome move?
Swaminathan Aiyar:
The Budget certainly spells out an additionality that there is going to be that much more public investment. This will definitely help but beyond that point, the big question is will we really be doing 8-8.5% growth? If we do not get that real growth, then I am afraid you are not going to get the revenues which the government is going to invest. You have to cross your fingers and hope that this high-growth rate is for real. If that is not the case, a number of the other calculations will come tumbling down.But taking the figures at face value yes this is a Budget for growth. It should be able to kickstart the process, not just directly. I would say this will animate spirits.
ET NOW:
How do you read the whole host of tax proposals in the Budget? The move to cut corporate tax over a four-year period, the move to hike service tax and also the move towards easing tax litigation?
Parthasarathi Shome:
I must say that I am duly impressed by the tax proposals. The preannouncement of the reduction in corporate tax over four years is an excellent idea, that many countries already follow. Now that the finance minister has taken the step to do the same, businesses can plan much better. Second, in terms of the service tax, it had to be done at some point and he has bitten the bullet there. At the same time, the surcharge on the super rich was also called for. It now compares somewhat in terms of other countries like South Africa and developed countries where at this one-crore point their marginal rates are much higher. So all in all, I would say that in the overall direction, it has been very impressive on the tax front.
However, when you go into the nitty-gritty, he will have to follow up on some of the issues. He said that on the indirect transfers issue, there will be a circular brought out by the CBDT. It has taken a long time and they must follow this up very quickly. I am very glad that on GAAR, he has given a two-year reprieve for implementation but the most important thing is for proper training of the tax officials in order to carry their duty out.
ET NOW:
PM promised that he will work towards reducing the ease of doing business. Do you see enough in terms of detailing in the budget that will address this big concern of corporate India to improve the ease of doing business?
Chanda Kochhar:
Yes, not reduce but improve ease of doing business. Clearly this point has been touched upon in various forms. First off all when you talk of the plug and play model that itself goes to say that we will create a project ready and then hand it over for investment. Then you heard about the ebiz portal where all the approvals can be kind of combined and they could be tracked on an electronic basis. Then you had the reference to the fact that you can actually start business without prior approvals and then actually get regulated thereafter that is again a very very important point towards ease of doing business. Also, there are some important points which in a way combined not just ease of doing business but enhance business in India, for example this whole permanent establishment tax on the funds.
ET NOW:
What do you think is the big idea from this budget, ultimately markets want earnings, do you think the budget has done enough to aid earnings going forward?
Shankar Sharma: The move on corporate tax is something that I personally have believed that India in light of what happened after 2008, we definitely needed to cut corporate taxes to spur investment and I am very, very, very pleased to see this move and we do business in the UK and now UK corporate taxes are something like 20% down from north of 30% when we started doing business there 10-15 years back. So for a lot of our international transactions now, we actually choose the UK as a jurisdiction rather than go to jurisdiction where you might not have any tax but they are not supposed to be very, very legitimate jurisdiction so you can see how much investment flows back into the UK simply because they cut taxes. I hope this 25% over four years actually happens and I am pretty sure when the happen, you will find a lot of investment coming into India to take advantage of this low tax rate.
ET NOW:
Everyone on our panel seem to be applauding the Budget. So let us find some fault lines and if you cannot find one, let me give you a hint tax free bonds, which is bad news for the SIP and equity investors.
Sunil Singhania:
Frankly, from my perspective, the event is behind us. We make a lot about an event and the finance minister has clearly said that it is not only in the Budget, but in the next three, four, five years that they will keep on taking steps. So, we are very positive on the economy and the markets. The Budget was an important document and it is behind us now. Let us focus on what the positives can be and very clearly, both the microeconomic and the government support is there for the economy. As long as returns are made, we are not bothered about investors. The investors are smart enough to find their way into assets, which will give them good returns.
ET NOW:
Are you happy with what you have seen?
As far as the infrastructure thrust is concerned, plenty of proposals in the sector. One the interest thrust is the plug-and-play, other, the increase in allocation. What excites you the most?
Vinayak Chatterjee:
Actually, a slew of measures announced should certainly excite the infrastructure sector. We see it as an extremely positive Budget for us. Let me outline what our observations of the boosters for the infrastructure sector are: First, it is a very clear recognition of the role of public expenditure in infrastructure projects and the vehicle to kick-start the growth cycle that we had discussed before the Budget and we see it has been significantly re-emphasised by the FM. Point number two is just before the Budget, we were discussing that we have been advocating creation of budget vehicles to garner fronts from different sources and he announced the creation of a national infrastructure and investment fund, with an initial seed capital of `20,000 crore from the Consolidated Fund of India. We would say thank you, and well done. Point number three, tax-free bonds to garner resources outside the Consolidated Fund of India for roads, rail and irrigation is a very good step. Point number four is PPP revisited. Five, corporatisation of the 12 major ports owned by the government.
Point number six. After 10 years of speaking to the government, from PMO to planning commission, we have got the point across to the government that projects should be awarded transparently only if all permissions are in place, which is something the FM said will be the norm. To conclude, we really could not have expected more from the Budget.
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